Utility stocks have long had a reputation as a source of steady and predictable dividend income. Many retirees like to load up on utility stocks as a means of supplementing their retirement income and they can serve as a safe haven in times of rapid economic change.
Seen primarily as a defensive investment, utilities struggled around the time of the financial crisis as well as during the Hurricane Sandy super storm. While the utility sector has struggled to revisit its all-time highs, the ongoing development of natural gas and nuclear power as reliable alternative energy sources continues to provide the backdrop for future growth in the sector.
You can find a number of utility stocks that currently yield 4% or more but finding ones that have a history of steadily raising the dividend narrows the list considerably. If you're looking to add a utility company to your portfolio, this list might be a good place to start.
El Paso Pipeline (NYSE:EPB)
El Paso Pipeline is engaged in the interstate transportation and storage of natural gas.
The company continues to benefit from the substantial growth and demand for natural gas and that growth thus far has translated to the balance sheet as both revenues and earnings have been able to grow approximately 10% per year for the past three years. Growth isn't expected to be quite as robust going forward but analysts are estimating 7% growth over the next five years.
The stock currently yields an impressive 5.54% and while the dividend history of this company isn't quite as long as some others on this list it's arguably the most impressive. El Paso has increased the dividend paid to shareholders for 21 straight quarters. That's right - the company has raised the dividend every QUARTER for the last five years!
Suburban Propane (NYSE:SPH)
Suburban Propane is involved in the distribution of propane and other fuels all across the country.
Thanks to its acquisition of Inergy's (NRGY) propane business, Suburban resides as the No. 3 propane distributor behind only Amerigas (NYSE:APU) and Ferrellgas (NYSE:FGP). The acquisition helped boost the company's revenue 63% year over year and net operating cash flow now sits at almost double the rate of the industry average. Earnings were affected this year as a result of the acquisition ($0.48 per share versus $3.22 in the prior year) but analysts expect them to rebound to $2.54 per share in the coming year.
The dividend for Suburban currently sits at 7.76% and the company has raised the dividend on the stock more than two dozen times over the course of the last dozen years including once just earlier this year.
Southern Company (NYSE:SO)
Southern is a holding company that through its subsidiaries provides power to residences and businesses all along the Gulf Coast.
Southern has demonstrated solid earnings growth over the past year. Earnings rose over 40% in the most recent year-over-year quarter. The company reported earnings of $2.67 per share in the most recent fiscal year compared to $2.55 in the prior year and expects to report $2.75 in the coming year.
The stock currently has a yield of 4.19% and the company has managed to raise the dividend by an average of 4% a year for the past eight years. With its ability to grow earnings and revenue and its commitment to continue developing additional nuclear power sources, there's no reason to think that dividend growth will slow any time soon.
Duke Energy (NYSE:DUK)
Duke Energy is one of the leading energy providers to several states in the Central U.S.
Duke has managed impressive growth in both revenues and cash flows where rates continue to be above the industry average. The revenue growth didn't necessarily translate to the bottom line as Duke continued to work through the acquisition of Progress Energy but analysts expect a strong rebound in earnings in the coming year ($4.34 per share versus $3.06 in the prior year).
Duke stock currently offers a 4.21% dividend yield and while its growth rate has been a more modest 2% annual increase the stock does have an almost three-decade history of delivering strong dividends.
Consolidated Edison (NYSE:ED)
Consolidated Edison is the primary provider of energy to the state of New York.
Consolidated Edison benefits from having a lower debt ratio than the industry average while managing to increase net income by over 7% in the most recent year-over-year quarter. The company is only forecast to grow about 2-3% per year going forward but it's a cash generating machine that's currently sitting on a cash pile of almost half a billion dollars.
The current dividend of 4% is backed by an over 40-year history of steady growth in the payout rate and the company is scheduled to distribute almost $2.50 a share in 2013.
Brookfield Infrastructure Partners (NYSE:BIP)
Brookfield operates a globally diversified portfolio of infrastructure assets that consist of utility businesses.
The stock's price/book ratio of 1.5 is below the industry average of 1.6 and the company should continue to grow steadily as it benefits from its positions in natural gas storage and pipelines as well as its strategic partnership with energy giant Kinder Morgan (NYSE:KMI).
Brookfield has a limited history as an independent company but it's already kicking out a 4.52% dividend and the payout ratio has increased every year it's been in existence averaging around 10% growth per year.
Northwest Natural Gas (NYSE:NWN)
Northwest Natural Gas is a natural gas distributor that operates primarily on the West Coast.
The company experienced a rough quarter in Q4 2012 as far as earnings and revenue are concerned but the positive is that margins were up across the board. Revenues are expected to pick up again in 2014 rising an estimated 5% and analysts are still forecasting 5% average annual growth going forward despite the recent setback.
Northwest Natural Gas is among an elite group of companies that have not only a long history of dividend payouts but at least a 15-year history of raising the dividend every year. Northwest's current dividend of 4.17% should continue to be sustainable for the foreseeable future.
Each of these companies has a specific competitive advantage that should allow it to continue growing and expanding in the future. Moreover, the current dividend payouts and the expected continued growth in those payouts make each of these stocks a desirable addition to any portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.