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SCANA Remains A Speculative Opportunity

Apr. 05, 2018 1:59 AM ETSCANA Corporation (SCG), DNEE48 Comments
Michael Wald profile picture
Michael Wald
636 Followers

Summary

  • Investors and potential investors gained useful lessons about the company over the first 3 months of 2018.
  • SCANA’s stock remains speculative but some of the risks are receding.
  • Despite continuing to face headwinds, there are reasons for optimism.

It has been an interesting and educational first quarter for electric utilities in general, and SCANA (NYSE:SCG) in particular.

Euphoria early in the quarter about stronger economic growth along with corresponding higher interest rates pushed down utility share prices only to be followed by fears of a trade war, dropping Treasury yields, and a renewed interest in the relatively safe haven of electric utilities.

Investors who speculated that the 10-year Treasury yield would break 3% instead saw the bond close the quarter at 2.741% as compared to Utilities Select Sector SPDR ETF (XLU) yield of 3.47%.

Meanwhile, you have SCANA with a yield of more than 6% with a stock price that declined but only slightly more than XLU, which is made up of some of the most dominant utility companies in the country.

Not bad for an electric utility being investigated and castigated from all sides and one that seemed to teeter on the edge of possible bankruptcy.

The first quarter of 2018 was very educational to SCANA investors and potential investors, and they should think deeply about those lessons.

3 lessons learned in the past 3 months

Lesson 1 = A floor has developed in support of SCANA’s stock price.

While SCANA’s stock price fell near the $35 level, its adjusted closing price never crossed that line. Its $2.45 dividend, with a resulting yield of better than 6% and a book value in the mid-$30 range, is keeping the stock price floating along. As a result, over the first quarter of 2018, the stock lost just 4.2% of its value since the end of December, based on adjusted closing prices, compared to a 3.3% loss for the XLU. All the gyrations of Dominion Energy's (NYSE:D) offer notwithstanding.

Source: SeekingAlpha.com

In comparison, the company pursuing the merger with SCANA, Dominion Energy (NYSE:

This article was written by

Michael Wald profile picture
636 Followers
I am retired from the U.S. Department of Labor after a career that included 10 years as the U.S. Bureau of Labor Statistics's Southeast Regional Economist where I focused on U.S. labor markets. My main interest is in bonds, utility stocks, and REITS. Individual stocks and bonds are as much affected by the overall direction of the economy as the activities of individual firms, so when I focus on stocks, I include consideration of the political environment in which a company operates as much as on the company's financial situation. It is important to get underneath the top line data, as reported in the media, to really understand the direction of the economy. My goal is to provide knowledge and understanding of macro trends and add depth to the national statistics reported elsewhere.

Analyst’s Disclosure: I/we 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.

SCANA remains a speculative stock and not recommended for long-term income investors.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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