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A utility love thread......
#1
I've always loved utilities.  They've outperformed the rest of my port perhaps one out of three years going back over 25 years.  It's rare when they dip much over 10% off their 52 week high.  As I've mentioned before I caught XEL after an execution error and rode it for 500%.  But that isn't a realistic expectation going forward.  To me they are nearly as safe as cash if you have a minimum three year time horizon and a diversified mix of UTES.  I intend to make them a much larger part of my port as I approach retirement.  

The true intent of this thread is to encourage others to share their favorite utilities, why they like them, and if they recommend them at current prices.  I will certainly research them.

Generally speaking, I look for the following in a utility I am about to enter....

-Minimum 3% current yield, with a history of dividend increases.  I'll consider a high div from a UTE in peril if the forward story sounds reasonable.  
-A reasonable likelihood of increased revenue growth for the foreseeable future. If revenue growth is flat the current yield better compensate for it now.  It's mandatory for me.
-Fast growth rate UTEs with a very low dividend may be shunned in a rising interest rate environment so I have always avoided them.  I feel like they may be treated like a normal stock in a tough market when it's too easy to get 3% yield with zero risk.  I could be wrong.
-I prefer UTEs with the wisdom to think to the future.  More Natty gas, less coal, invest in wind and solar as it is part of the future.  It's expensive to convert so best to start now.  XEL is a good example of doing it right IMO.
-I like to spread my UTES around the country.  Hurricanes, forest fires and unseasonably warm winters happen. These all effect the BIZ outlook when it happens. 
-I don't like high PE UTEs but I may have to get over that or I'll possibly sit on the sidelines forever. 

-I am currently considering or attempting to build larger positions in AEP, XEL, D, SO , ED

Your recommendations are much appreciated.
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#2
I love my utilities as well, hard to beat the consistent growth and attractive yields.

Here are a few others to consider looking into.

NextEra Energy (NEE) - A lower yield, but high growth for a utility. The leader in renewable energy, and the largest utility I follow at a nearly $85B market cap. Should see several more years of double-digit dividend growth ahead.

WEC Energy (WEC) - Formerly Wisconsin Energy, this is a consistent ~7% grower with an A- credit rating and 15-year streak of increases. A bit expensive at a 21 PE, but still yields over 3%.

CenterPoint Energy (CNP) is on my watch list and looks attractively valued now. Yields just over 4%.

I also like the water utilities American Water Works (AWK) and Aqua America (WTR).  AWK is pretty expensive, but WTR is trading fairly close to its historical valuation level.

Long D, XEL, WEC, NEE, AWK.
My website: DGI For The DIY
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#3
Regarding NEE... I took a look a while ago and if I remember correctly: negative cash flows? For a utility? No thanks. I might be mistaken but that is what I remember.

I really like water utilities too, though as of right now they are too highly valued. I hold WTR (which is actually ok value but not a pure water utility anymore) but I might change that to AWK or AWR at some point.
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#4
If it's OK with Eric I'll post a link to his SA utility article here. I believe he already did in another thread actually.....

I have taken a look at some of the fast growers Eric shared. I am interested at the right price. Most utilities that appear to be worth owning are lofty right now. They look like they could use a 10% haircut but who knows if that happens. They're bound to pull back some with a few FED rate hikes. I wouldn't advise anyone to go "all in" on utilities today, but I really do feel like they belong in most ports in the proper allocation.

I need to do some DD on water utilities. I've never owned one. It's no secret it's become a valuable commodity in some parts of the US.
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#5
Bought some VPU today which is a Vanguard Utilities ETF with a 3 1/2% DIV. Top holding is NEE and also D-SO-AEP-XEL in the top ten. Also some water Utes. If my put sales fail to exercise at least I have some more utility exposure for now. I can trade this ETF commission free so Coulda woulda shoulda done this a month ago.
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#6
Love utilities heading into late cycle. Most recent purchases were BKH at 58.45 and BIP at 37.23 a few weeks back. I typically look for a utility trading below its 10yr average P/E, investment grade (BBB+ or better) credit rating, and a Chowder Number of 8 or more.

I also like to have diversified holdings within the space (presently holding AEP, BEP, BIP, BKH, CNP, D, DUK, NGG, PPL, and SO). Utilities, being mostly regional, tend to be susceptible to regional black swan events (like PCG with California fires, and PPL/NGG with Brexit).
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#7
(11-26-2018, 12:32 AM)crimsonghost747 Wrote: Regarding NEE... I took a look a while ago and if I remember correctly: negative cash flows? For a utility? No thanks. I might be mistaken but that is what I remember.

I really like water utilities too, though as of right now they are too highly valued. I hold WTR (which is actually ok value but not a pure water utility anymore) but I might change that to AWK or AWR at some point.

Researching NEE now.  It is among the few fast growers that really have my attention.  It's a little tough (and probably inappropriate) to evaluate exactly like a stodgy old Ute that grows at 3%.  It's definitely more volatile, but the longterm chart is up and to the right for sure.  The 10% growth in EPS and DIVs, and low PE is causing that no doubt.  Their CAPEX expenditures are hard on the cash flow as you mentioned. Heavily owned by institutions and they trade it like baseball cards. Smile I like their chances better with a different US political atmosphere but that day comes at some point.  We are fickle on this side of the big pond  Smile
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