This is where to find reliable dividend investments.
With the recent cold weather sweeping the nation, many Americans have an eye on their utility bills. Even those who wear a sweater and wool socks are bracing for higher natural gas or electricity expenses. But long term, most households and businesses use electricity at a very reliable pace. This reliability makes utility stocks a tremendous opportunity for investors. It’s not short-term spikes in demand that matter, but the stability that comes from a highly regulated industry where many operators have geographic monopolies. This stable business model results in similarly stable dividend payments to investors. Here are seven top picks to consider for 2018.
Consolidated Edison (NYSE: ED)
Known as ConEd to roughly 10 million customers in greater New York City, this utility stock is the poster child of a good income investment. Founded almost 200 years ago and with more than a 100 years of dividend payments, this stock is as stable as they come. On top of this history, ConEd has a long track record of increasing its payments to shareholders. The company has increased its quarterly dividend payments at least once in each of the last 43 consecutive years. The regional dominance of an electric utility is always a good thing, but it’s an added plus when that company is in a thriving metropolitan area.
Dividend yield: 3.3 percent
Next Era Energy Partners (NEP)
A more aggressive play is Next Era Energy Partners, a utility and energy company committed to clean energy projects like wind farms and solar power generation facilities. This is admittedly a niche category, but green energy is an increasingly important part of the U.S. power grid. And lest you think NEP is some kind of start-up, keep in mind that the firm’s projects are focused on full contracted projects and only wind and solar stations in the most favorable geographic areas. As a result, Next Era is comfortably profitable. And since the company is structured as a partnership, NEP gets special corporate and tax benefits while its shareholders get a mandate for big dividend payments.
Dividend yield: 3.5 percent
AmeriGas Partners (APU)
Another interesting twist on utility investing is AmeriGas, a propane distribution company that offers cylinder exchanges at your local convenience store, as well as home distribution for customers that use propane for home heating or business use. APU is a bit more linked to the rise and fall of underlying propane prices, but over the long term the business evens out like any utility. And thanks to its structure as a master limited partnership like Next Era instead of a traditional corporation, the firm has a legal mandate to share its profits with its investors. It adds up to a generous yield and a reliable business for APU.
Dividend yield: 8.1 percent
Southern Co. (SO)
Southern Co. is one of the largest utilities in the U.S., with a market value of almost $48 billion serving 19 states mainly from Maryland to Florida through electric power and natural gas subsidiaries. This company offers scale and stability, but also a record of reliable income. Southern Co. has mailed checks to its shareholders every quarter since 1982. Furthermore, this utility has steadily increased payouts annually since 2001. Shares have been a bit volatile lately with setbacks on plans for a nuclear power plant and a “clean coal” plant in Mississippi. However, the long-term track record of this company is quite sound.
Dividend yield: 4.9 percent
Public Service Enterprise Group (PEG)
Public Service Enterprise Group is an energy company that operates in the Northeast. It serves roughly 2 million power and 2 million gas customers in about 300 communities mostly in New Jersey. What makes PEG stock an interesting investment is its acquisition potential. The company was sought by Exelon Corp. (EXC) in the mid-2000s, but the deal was scuttled because of regulatory fears. In a more business-friendly environment in 2018, there’s a chance that Public Service Enterprise Group is again in play as a buyout target. And if not, income investors can continue to cash those quarterly dividend checks.
Dividend yield: 3.4 percent
CenterPoint Energy (CNP)
CenterPoint Energy is another dual utility, with a core electric transmission business complimented by natural gas distribution. These arms provide a great one-two punch that ensures a steady revenue stream for many years to come. What’s more, recent earnings reports show that CenterPoint is actually doing a decent job growing its customer base across states in the center of the country that include Arkansas, Oklahoma and Texas. This consistent single-digit customer growth adds up over time. CenterPoint also owns a controlling interest in Enable Midstream Partners (ENBL), a pipeline operator that provides an added bump to payouts and a nice diversification to an already very stable business model.
Dividend yield: 3.9 percent
Duke Energy Corp. (DUK)
Duke Energy is another big-time utility worth a look from income-oriented investors. With massive operations across North Carolina, South Carolina and Florida, it is one of the largest American electric utilities thanks to a series of acquisitions in recent years. Duke stock underperformed the broader Standard & Poor’s 500 index in 2017, in part over questions about coal plant clean-up costs in North Carolina. That soft performance is a long-term investor’s opportunity, however, since you can now buy in at a very good price. Over time, the rate-increase headlines won’t matter much and the dividends are sure to keep coming to power your portfolio.
Dividend yield: 4 percent
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7 Utility Stocks to Power Your Investment Income originally appeared on usnews.com
