Long considered the domain for “widows and orphans,” utilities have developed a somewhat stodgy reputation. Why are utilities considered good for widows and orphans?
Here a few reasons: 1) They are generally less volatile than the market as a whole (low beta). 2) Their products are something that people continue to need and use no matter what the economy is doing, thus, 3) Their dividends tend to be more stable and secure.
Utilities would be the perfect dividend income investment, except for one thing – they tend to have low a dividend growth rate. As such, you wouldn’t want a whole portfolio of utilities and you need to be very selective in which utilities are added, and when they are purchased.
The dividend growth rate is a key metric in many calculations. As such, I use a conservative estimate as follows: The minimum dividend growth rate of the 1, 3, 5, 7, 10-year compound annual growth rate or 15%, if dividends grew on average in excess of 15% for each consecutive four-year period, within the last 10 years of history.
This week week, I screened my dividend growth stocks database for utilities with a yield at or above 4% and a dividend growth rate above 1%. The results are presented below:
Middlesex Water Co. (NASDAQ:MSEX)
Yield: 4.0% | Dividend Growth Rate: 1.2%
Middlesex Water Co. primarily provides regulated water utility service in parts of New Jersey and Delaware, as well as operates waste water systems and conducts municipal contract operations.
WGL Holdings Inc. (NYSE:WGL)
Yield: 4.1% | Dividend Growth Rate: 2.1%
WGL Holdings Inc. provides natural gas service in the Washington, D.C., metropolitan area and surrounding regions, including Maryland and Virginia.
Atmos Energy Corp. (NYSE:ATO)
Yield: 4.2% | Dividend Growth Rate: 1.5%
Atmos Energy Corp. distributes and sells natural gas to residential, commercial, industrial and agricultural customers, and also conducts non-utility operations.
Avista Corporation (NYSE:AVA)
Yield: 4.4% | Dividend Growth Rate: 8.8%
Avista Corp. generates, transmits and distributes energy as well as engages in energy-related businesses.
AGL Resources, Inc. (AGL)
Yield: 4.5% | Dividend Growth Rate: 2.3%
AGL Resources Inc. provides natural gas to about 2.3 million customers, provides asset management services, and operates a fiber optic network.
UniSource Energy (UNS)
Yield: 4.6% | Dividend Growth Rate: 7.7%
Unisource Energy, through Tucson Electric Power Co., provides regulated electric service to over 392,000 retail customers in Southeastern Arizona.
Black Hills Corporation (NYSE:BKH)
Yield: 4.9% | Dividend Growth Rate: 1.4%
Black Hills Corp. is a diversified South Dakota-based holding company that encompasses electric utility and integrated energy businesses.
Scana Corporation (NYSE:SCG)
Yield: 5.0% | Dividend Growth Rate: 1.6%
Scana Corporation is an energy-based holding company that provides electric, natural gas and telecommunications services.
Vectren Corporation (NYSE:VVC)
Yield: 5.1% | Dividend Growth Rate: 1.1%
Vectren Corp. delivers gas and/or electricity to more than one million utility customers in Indiana and Ohio, and offers other energy related products and services.
Duke Energy (NYSE:DUK)
Yield: 5.3% | Dividend Growth Rate: 2.1%
Duke Energy Corp. provides service to 3.9 million electric customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky, and 500,000 gas customers in Kentucky and Ohio.
As with past screens, the data presented above is in its raw form. Some of the companies would be disqualified for poor dividend fundamentals. However, some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.
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