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4 Big Income Utility Preferred Stocks

March 15, 2012 | About:
Here are preferred stocks from utilities that benefit from a steady stream of monthly bill payments from customers. With the Fed targeting 0%-0.25% for the federal funds rate, you ought to consider the following:

Progress Energy Carolinas (PGN) ($5 Cumulative)

Recent Price$100.00 per share
Callable?Anytime at $110.00 per share

Possible for 9.7% in capital appreciation
Preferred Stock IPOFeb 1974
Dividends$1.25 per quarter

All payments made since Q4 2006

Next dividend payment should be on Apr 1

Record date is on Mar 15
Current yield4.9%
S&P RatingBBB-
52 week trading range$84.00 - 101.00
2009 lows~$60 (from $94)
Ticker symbol (Yahoo! / Google / Fidelity)CPWPO


The company posted a 35.2% decrease in EBIT to $910 million in fiscal year 2011, but interest charges fell by 2.9% to $725 million. The dividends per common share ($2.119) is greater than the earnings per common share ($1.94). Preferred stock make up $93 million of equity, which is a much smaller fraction of common equity $10,021 million, and so I would feel comfortable that preferred dividends are more likely to be paid out. In any case, this is a utility company, so the firm will aim to make these payments, so that it can retain its investment grade rating as well as issue more debt. View the earnings release here. Dividends were temporarily suspended from 2002 to 2006, so I suggest this to retirees willing to take on a modest amount of risk. Also, consider purchasing at around $90 per share.

Virginia Electric & Power (D) ($6.98 Cumulative)

Recent Price$103.00 per share
Callable?Anytime at $102.80 per share
Preferred Stock IPOAug 1993
Dividends$1.745 per quarter

All payments made since Q3 2006

Next dividend payment is on Mar 20

Record date is on Mar 2
Current yield6.7%
S&P RatingBBB
52 week trading range$100.85 - 125.00
2009 lows~$92 (from $102)
Ticker symbol (Yahoo! / Google / Fidelity)VELPL


The company is a subsidiary of Dominion, which posted a decrease in profits of 49.9% to $1.408 billion. This is primarily due to lower merchant generation margins and lower weather-related sales in the firm's regulated electric service territory. To obtain preferred stock and common stock dividends information, I look at 10Q for the first nine months of 2011, where $12 million and $848 million were paid out, respectively. My assessment is that the company should be able to make these payments. Bcause the VELPL maintains an investment grade rating, I recommend that income investors should consider making this a part of their portfolios. Waiting for a pullback may not be worth it, as this trades near its 52 week lows.

Washington Gas & Light (WGL) ($4.25 Cumulative)

Recent Price$89.05 per share
Callable?Anytime at $105.00 per share

Possible for 17.6% capital appreciation
Preferred Stock IPOBefore EDGAR system existence in 1984
Dividends$1.0625 per quarter

All payments made since Q2 2002

Next dividend payment should be on May 1

Record date is in the first week of Apr
Current yield4.7%
S&P RatingA-
52 week trading range$77.50 - 99.00
2008 lows~$60 (from $94)
Ticker symbol (Yahoo! / Google / Fidelity)WGLCN


The preferred dividends amounted to $330,000 in the first 3 months of fiscal year 2012. Compare this to $85.144 million in EBIT and interest expense of only $9.822 million, I believe that the company is in adequate position to continue to make preferred dividend payments for the next couple of years. I recommend that income investors should opt to purchase these shares soon. A good entry point would actually be now because WGLCN is more than 10% below the 52 week high.

San Diego Gas & Electric (SRE) (4.60% Series)

Recent Price$18.02 per share
Callable?Anytime at $20.25 per share

Possible 10.9% capital appreciation
Preferred Stock IPOBefore EDGAR system existence in 1984
Dividends$0.23 per quarter

All payments made since Q1 2002

Next dividend payment is on Apr 15

Record date is on Mar 10
Current yield5.0%
S&P RatingBBB+
52 week trading range$16.10 - 22.00
2008 lows~$12 (from $19)
Ticker symbol (Yahoo! / Google / Fidelity)SDOGP


San Diego Gas & Electric is a subsidiary of Sempra Energy, which demonstrated an EBIT of $1.316 billion (+77.0%) in the first 9 months of 2011. However, interest expense rose by 6.5% to $344 million. Consider that preferred dividends only come out to $6 million, and dividends per common share is $1.44 with diluted EPS at $4.40. Thus, the company has enough resources to continue to make dividend distributions. I suggest SDOGP to retirees looking to take on a modest amount of risk in their income portion of their portfolios.

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