5 utility stocks with dependable dividends

When it comes to dependable dividends, utility stocks are often the first investments that come to mind – but even those haven’t been a safe haven lately. But a just-posted article by Bullish Bankers sifts through the sector to find five utility stocks with dividends you can count on.

Here’s my quick take on the five dividend stocks mentioned (the stars represent Dividendinvestor.com’s star ranking system – three stars are five years of consecutive dividend increases, four stars are ten, and five stars are 20):

Consolidated Edison [[ED]] (*****) – I wouldn’t mind owning this utility stock (currently trading at about $38 and yielding 6.3%) at the right price. This Dividend Aristocrat has increased its dividend for 35 consecutive years – although recently at a snail’s pace – and its payout appears safe. However, a quick valuation check suggests the stock is overvalued here. I’d start getting interested down at the $30 level or below.

CPFL Energia [[CPL]] (0 stars) – Trading at about $40 and yielding over 9%, the shares of this Brazilian hydroelectric provider appear relatively fairly valued based on conservative estimates. It’s not clear what one might expect in terms of dividend growth – especially with the current payout ratio near 100% – although the company’s earnings growth prospects and cash flow are considered good. As with many ADRs, the dividend payout is usually twice a year. There just isn’t enough price and dividend history available to make me feel more omfortable with this ADR, so I’ll be giving it a pass for now.

Dominion Resources [[D]] (***) – Of the five utility stocks mentioned here, D appears to be the best value. Trading at about $31 and yielding 5.6%, the shares appear somewhat undervalued by most valuation measures and are trading just about in line with their long-term linear regression uptrend line (which could be interpreted as a technical “fair value” level). D has a stable – though not necessarily growing – dividend history, with a recent five-year growth rate of about 4%. I’ll be looking at this more closely if it drops into the mid $20s or below.

FPL Group [[FPL]] (****) – This Florida public utility recently raised its quarterly dividend from $0.4450 to $0.4725 per share. It has raised its dividend for 13 consecutive years and has a five-year dividend growth rate of 8%. At a current share price of about $49 and yielding only 3.8%, the stock appears somewhat overvalued based on fundamental valuation measures as well as its long-term historical price trend. If the stock were to drop to a level resulting in a more typical yield for a utility (about 5%-6%), it would have to trade in the $30s, which also represents the level of its long-term linear regression uptrend line. That’s also where I’d start getting interested.

Southern Company [[SO]] (***) – This electricity distribuor operates in Alabama, Georgia, Florida and Mississippi. Its stock, currently trading at about $31 and yielding 5.5%, appears somewhat overvalued by most valuation measures and about fairly valued based on its long-term linear regression trendline. The company has increased its dividend for eight consecutive years and has a recent five-year dividend growth rate of about 4%. If the stock were to drop to an undervalued level – i.e., below $25 or so – I’d start getting interested.

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