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Utilities And Rising Interest Rates: Fact Or Fiction?
- History points to rising interest rate cycles of 2004 to 2007, 1993 to 2000, and 1986 to 1989.
- At the top of the cycle, the yield curve flattens.
- Utilities continued to provide positive total returns from the beginning of tightening to the end of tightening. Shareholder problems lie in the down cycle, not the up cycle.
How Much Money Are You Planning To Lose In Your Bond Portfolio?
- Goldman Sachs moves up the date for interest rate hikes, and pegs a 2018 Fed Fund rate at 4.0%.
- Review past yield curves for a possible glimpse into the future.
- It is easy to determine interest rate risk for individual bond fund portfolio designs.
CLP Holdings: 4.1% Yield Limits Potential Downside
- A turn in Australia’s energy markets is needed to get back on track for even modest dividend growth.
- CLPHY 10-yr total returns have equaled S&P 500 with a beta of just 0.20. Same return, substantially less volatility.
- Current share valuations are in line with both CLPHY’s 5-yr average and its US counterparts.
Electricity Transmission Assets: No Longer A Crown Jewel?
- FERC is lowering the allowed base ROE for transmission investments.
- The ROE incentive for transmission investments over state-regulated assets will evaporate for most utilities.
- The Midwest ISO could experience the highest reduction in profitability based on a 14.5% reduction in allowed ROE.
PPL: A Utility Completing Its Evolution
- PPL is jettisoning its merchant power business by merging with selected assets of Riverstone to form Talen Energy.
- It seems odd timing, as PJM merchant power pricing seems to finally be improving.
- Dividend growth going forward will probably remain sub-par.
Chicago Bridge And Iron - Speculative Buy
- CBI has a long history of creating shareholder value, based on its cyclicality. In addition, CBI has a long history of successful acquisitions and integrations.
- Management needs to reply to the accusations – and the sooner the better. But shareholders should not hold their breath waiting.
- Even with the current price weakness, CBI is “fairly valued”, and a “speculative buy” until the dust settles.
FirstEnergy: Turnaround In Store For Patient Shareholders
- 2014 should be a trough year for FirstEnergy.
- After a dividend cut in January, weaker players have been shaken out with trading volume since the announcement about equal to shares outstanding.
- FirstEnergy is eerily similar to Exelon, but share prices have not mirrored Exelon's 36% total return y-t-d.
Consolidated Water: Not Very Compelling Valuation
- While desal is an intriguing industry with growth prospects, Consolidated Water has not been best in class.
- Operating Cash Flow and Return on Invested Capital has been in a downward spiral for several years.
- Mexican desal project could be substantial, but will take years to bring on line, after finding a financial sugar daddy.
American States Water: Higher Political Risk Makes Watching From The Sidelines Prudent
- With a severe drought in California, the political risks for American State Water increases.
- American States Water has outperformed the S&P 500, but not so much its peers.
- Better investment opportunities and lower risk may lie in water utilities serving the Northeast, Southeast, and Eastern Midwest.
Utility Firms That Are 'Good In Bed'
- Look for specific events to positively impact stock valuations over time.
- Review reasons for lower ROIC leading to lower earnings.
- “Cause and Effect” is alive and well in utility investment stories, ranging from higher FERC regulated assets to a turn in electricity pricing.
Gabelli Pressures National Fuel Gas To Realize Shareholder Value
- National Fuel Gas is 33% undervalued, according to Mario Gabelli. Gabelli is beginning to flex his muscles with a 9.1% share of outstanding stock.
- National Fuel Gas is diversified with gas utility, midstream and E&P assets. It holds the largest acreage in the Marcellus with 800,000 acres. These are mainly fee based, not leases.
- National Fuel Gas raised earnings guidance to $3.40 - $3.55 a share for FY 2014.
UGI Corp.: A Gas Utility That Dividend Growth Investors Can Love
- UGI has raised its dividend annually for the past 27 years and has a 130 year history of dividend payouts.
- UGI has $9.10 per share of interest in AmeriGas Propane LP and is the GP with profitable IDRs.
- Heating fuel conversion within hook-up range of current pipelines could grow customer base by 41% over time.
ITC Holdings Is A Core Utility Asset, Especially For Dividend Growth Investors
- ITC has offered long-term annual total returns of 11.1% vs. 7.7% for regulated utilities.
- FERC-Allowed ROE for ITC is between 21% and 38% higher than recent average State-PUC awards.
- ITC is laser-focused on expanding its Transmission Rate Base between now and 2018.
Is Comment Crowdsourcing Correct On Exelon?
- EXC has been a much maligned stock suggestion.
- Investors who purchased between July 2005 and December 2011 are still underwater on a total return basis while most all other investors should have a positive total return.
- Share prices are up 33% since January 2014.
Public Service Enterprise: Buy For Transmission Growth
- 68% of CapEx to be Invested in superior ROE transmission growth.
- Well-managed balance sheet.
- Transmission growth will Drive ROIC, EPS and dividend higher.
Staples: 'Just Walk Away, Rene'
- The long-term looks problematic for Staples.
- Remedial actions of store closings, layoffs, and pressure for lower vendor costs are indicative of decline in its business model.
- The best time to invest in the retail sector is when SSS and new stores are growing, not contracting.
Southern Company: Investors Sigh Of Relief
- Federal loans tip the balance towards Southern Company investors.
- Current yield and compelling valuations make Southern Company a core utility holding.
- Loan guarantees lower Southern Company's risk profile.
- Exelon: 'Keep On Walkin,' Don't Look Back'
- BGC Partners: Buying Cash, Stock, And Growing Commercial Real Estate Exposure
- Piedmont Natural Gas: Safe Small Cap Utility For The Next Market Meltdown
- A Few Reliable High Dividend Utilities
- Is Niska Gas Storage Worth The Risk Of A 9.1% Yield?
- Utilities For Dividend Growth Investors, Part 2: ITC Holdings
- Electricity Spike In Northeast Exposes Investment Opportunities
- Utilities For Dividend Growth Investors, Part 1: Consolidated Edison
- American Electric Power: Potentially Better Opportunities Elsewhere
- Spectra Energy: Gas Utility With Plenty Of Catalysts
- National Fuel Gas: Getting The Gas Utility For Free
- Deep Freeze Causes Forced Power Generation Outages - Preview OF Future Problems?
- Don't Be Afraid Of Utility Stocks
- Who Are You Mr. And Mrs. Utility Investor?
- 9 Overlooked Equities For 2014