Utilities sector

[EricL]

I've had ALE in my bullpen for several years, but was never impressed enough to move it to the watch list. However, looking again now, it's metrics have improved and it may be worth adding.

Its dividend growth went from 2.9% CAGR over the last 10 years, to 3.7% over the last 5, to 4.7%, 4.9%, and 5.1% for the last three.

Management has guided for 5-7% annual earnings growth, with dividend growth tracking earnings growth and targeting a payout ratio of 60-65%.

The current dividend is 68% of expected 2021 EPS of $3.62, so it may not be too big of an increase coming in January.

However, it looks like 5-6% is possible going forward after that.

Its BBB credit rating is on the low end of my comfort level for a utility, and it doesn't have the track record of a few others on the list, but with a yield over 4% and its growth expectations, it looks like a decent stock to own.

[fenders53]

Thanks for the feedback. It's never really met my threshold for a core holding. They have always had a bit too much exposure to the iron range/taconite biz. I wondered if they might be acquired some day but that never happened. Steel booms have been few and far between. Stock doesn't stay down long on a dip so I'll do my thing and wait for it to pop eventually. I suspect their migration towards renewables might fuel it whether it should or not. XEL crushed it the past 25 years and probably always will.

[vbin]

(12-25-2020, 05:09 PM)EricL Wrote: I'm not saying PCG couldn't be a good buy or you can't make money buying or trading it, I'm simply saying it's not what I consider a high quality dividend growth stock. Therefore it's not going to be on a list I put out to followers looking for DGI stocks.

PCG had problems even before the wildfires, as it had a frozen dividend from 2010-2015. So that says to me it wasn't necessarily a one-off event. It now owns a BB- credit rating and operates in a state that is lawsuit happy and with burdensome taxes and regulations.

That doesn't mean it is without value, it just means it's not something I'm interested in messing around with.

Both of you shared similar thoughts and that makes sense. Thank you. Appriciate it. I do have a small position in PCG now. In the past I have had better returns in SO and DUK. That's said PCGU(convertible, pays ~4-5%) is the only utility I hold right now and probably won't add a lot more than I hold. ( unless We count T as utility too).

[fenders53]

(12-27-2020, 08:54 PM)vbin Wrote:

(12-25-2020, 05:09 PM)EricL Wrote: I'm not saying PCG couldn't be a good buy or you can't make money buying or trading it, I'm simply saying it's not what I consider a high quality dividend growth stock. Therefore it's not going to be on a list I put out to followers looking for DGI stocks.

PCG had problems even before the wildfires, as it had a frozen dividend from 2010-2015. So that says to me it wasn't necessarily a one-off event. It now owns a BB- credit rating and operates in a state that is lawsuit happy and with burdensome taxes and regulations.

That doesn't mean it is without value, it just means it's not something I'm interested in messing around with.

Both of you shared similar thoughts and that makes sense. Thank you. Appriciate it. I do have a small position in PCG now. In the past I have had better returns in SO and DUK. That's said PCGU(convertible, pays ~4-5%) is the only utility I hold right now and probably won't add a lot more than I hold.  ( unless We count T as utility too).

T is another subject.  There was a day it may have been a utility sub prior to the sketchy acquisitions.  To me it is now a high yield bond substitute.  Prepare to lose enough capital to wipe out the entire dividend any given year. That's why I play option sale games with it.  Get the annual income over 12% and I can withstand some SP drop risk.

[EricL]

Here is a snapshot of my utilities watch list if vbin or others are interested.

   

[fenders53]

Damn that is some serious red ink for UTEs with no big issues. They have been overvalued for years and I have been patiently waiting for a chance to get to true full positions.

[vbin]

Thank you Eric. Too bad there is no like button. May be we should start a discord server,lol.

@fenders53 I started small position in a few of them but other than a handful, they are still over valued.

Added 2 today which aren't over valued. SRE and UGI.
I want to add up more SRE, like it so far.

[fenders53]

Better buy some more calls on stocks with no earnings for 2021 and 25 PSR.

[vbin]

(03-03-2021, 07:07 PM)fenders53 Wrote: Better buy some more calls on stocks with no earnings for 2021 and 25 PSR.

Aren't you invested in ARK? just becouse stocks with no earnings are trading at higher multiple doesn't make all UTEs cheap.

[fenders53]

(03-03-2021, 09:26 PM)vbin Wrote:

(03-03-2021, 07:07 PM)fenders53 Wrote: Better buy some more calls on stocks with no earnings for 2021 and 25 PSR.

Aren't you invested in ARK? just becouse stocks with no earnings are trading at higher multiple doesn't make all UTEs cheap.

Yes I have a few shares in the genomics and Fintech fund.  And back on topic.....

Some of the good utilities are near fair value now.  If interest rates rise too fast the entire market will likely correct.  I am still nibbling while it sorts out.  Almost zero put selling going on now.  The utilities growing at over 5% with decent yields will run nicely and I will be surprised if it isn't later this year.

[vbin]

Fair point. Hence I started small position in a bunch of them, AEP, NEE, XEL, SRE,WEC, UGI,EIX and a decent size big in ED.

Just a 1-2 % decline doesn't make sense to add. I am waiting for them to come down 4-5% where I started. They might( who knows). Looking at this chart though looks like value is picking up unless fed steps in.

[fenders53]

(03-04-2021, 10:58 AM)vbin Wrote: Fair point. Hence I started small position in a bunch of them, AEP, NEE, XEL, SRE,WEC, UGI,EIX and a decent size big in ED.

Just a 1-2 % decline doesn't make sense to add. I am waiting for them to come down 4-5% where I started. They might( who knows). Looking at this chart though looks like value is picking up unless fed steps in.

I understand what you are up to.  I encouraged you to nibble last week.    I'm not buying anything like 100 share lots.  I am trying to not inflict another round of "sit on my hands" on myself though.  I have wanted to go full position UTEs for years.  This is a good a time as any to nibble.  Some are pulled back 25% off highs.  No that doesn't make them automatically dirt cheap.  Higher rates will keep a leash on UTE share prices.  I hope they pull back another 10%.  The talking heads will change their minds and try to run them up if they do.  Some of the analysts have sell rating on top tier UTEs.  That made sense 25% ago but they wait for the run to be half over and then they are late with advice.  I am better off nibbling when I see signs the large sellers are getting harder to find.