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 a very low 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 included in your portfolio, 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 4 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:
Scana Corporation (SCG) is an energy-based holding company that provides electric, natural gas and telecommunications services. The company has paid a cash dividend to shareholders every year since 1946 and has increased its dividend payments for 12 consecutive years.
Yield: 4.1% | Dividend Growth Rate: 1.8%
Vectren Corp. (VVC) is an energy holding company that provides energy delivery services to natural gas and electric customers in Indiana and Ohio. The company has paid a cash dividend to shareholders every year since 1946 and has increased its dividend payments for 54 consecutive years.
Yield: 4.3% | Dividend Growth Rate: 1.1%
Northwest Natural Gas Co. (NWN) is a natural gas utility that provides service to some 611,000 residential, 62,000 commercial and 1,000 industrial customers in Oregon and southwestern Washington. The company has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 58 consecutive years.
Yield: 4.4% | Dividend Growth Rate: 1.7%
Westar Energy, Inc. (WR) provides electric generation, transmission and distribution services to apx. 690,000 customers in Kansas as of December 31, 2012. The company has paid a cash dividend to shareholders every year since 1924 and has increased its dividend payments for 10 consecutive years.
Yield: 4.4% | Dividend Growth Rate: 3.0%
AGL Resources Inc. (GAS) is an energy services holding company that provides natural gas to about 4.5 million customers, mostly in Illinois and Georgia, and operates several non-utility businesses. The company has paid a cash dividend to shareholders every year since 1939 and has increased its dividend payments for 11 consecutive years.
Yield: 4.5% | Dividend Growth Rate: 2.2%
Avista Corp. (AVA) generates, transmits and distributes energy as well as engages in energy-related businesses. The company operates in two business segments. The company has paid a cash dividend to shareholders every year since 1899 and has increased its dividend payments for 11 consecutive years.
Yield: 4.6% | Dividend Growth Rate: 5.2%
Duke Energy Corp. (DUK) merged with Progress Energy in mid-2012, and is the largest electric power holding company in the U.S., serving more than 7 million customers in six states. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 8 consecutive years.
Yield: 4.7% | Dividend Growth Rate: 2.0%
Southern Company (SO) is an Atlanta-based energy holding company and is one of the largest producers of electricity in the U.S. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 12 consecutive years.
Yield: 4.7% | Dividend Growth Rate: 3.6%
PP&L Corporation (PPL) is a holding company for electric utilities in Pennsylvania and Kentucky also owns utilities in the U.K. The company has paid a cash dividend to shareholders every year since 1946 and has increased its dividend payments for 12 consecutive years.
Yield: 5.1% | Dividend Growth Rate: 1.6%
As with past screens, the data presented above is in its raw form. Some of the 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 230+ 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: Long NWN in my Dividend Growth Portfolio and long VVC, GAS, AVA, DUK, SO, PPL, in my High-Yield Portfolio. See a list of all my dividend growth holdings here.
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