As a dividend stock investor I was one of the first to invest in electric utilities over a year ago when most investors were selling them off due to concerns over pending cap and trade legislation on the federal level. Indeed there was reason there for fear since cap and trade would hurt utilities profits significantly by increasing costs and not having a release on the other end for regulated electrics to pick up the added costs in added rate increases. But I was confident at the time the votes were not there to pass the onerous regulation. I mention regulated utilizes because regulated utilities are tied to state regulators for their rates and costs adjustments. Unregulated, where I no longer invest due to the high uncertainty, could likely have added the additional costs into their rate structure. But since many unregulated's do not have a monopoly position in their markets you can be sure customers would have looked for other sources for their energy needs. Recently investing in utilities is popular, since people see them as safe higher yield and a option for those who would normally invest in US treasuries. With all this noted you still need to be very careful when investing in regulated utilities.
When considering investing in regulated utilities all states are not the same. The regulatory atmosphere for many states is downright negative for many regulated electric utilities. Many states in the western and northeastern part of the country have basically inserted loads of harsh environmental rules on generation of power, some have even placed some social regulations as well. For instance First Energy, symbol FE, is regulated by Maryland regulators who are some of the most hard edged in the country. California can be added to that list. So selection is important so below are the only electric utilities I would consider currently.
Southern Company...symbol SO... absolutely the best utility in the country, maybe the safest stock in the country. SO not only has a good growth area in Georgia, Mississippi, and Alabama, they have the best regulatory atmosphere period. Best management in the utility industry.
Scana Corp...symbol SCG...maybe the best regulatory situation in the country being based in South Carolina. If the service area for SCG was as large as SO I would deem it the best utility investment. Still a safe investment for safety concerned investors. SCG just does not do anything stupid.
Duke Energy/Progress Energy..symbol DUK..Duke and Progress will be merging soon despite all the hoopla over the merger not going through. It is difficult to argue that customers will not be protected when a company is regulated. DUK will get improved management once the merger is completed. The current DUK CEO is just not top drawer in my opinion, while the current CEO of Progress who is taking over after the merger is top drawer. The only thing holding the combined company back is the silly rules requiring investments in bio mass and solar energy production in North Carolina. Of course the company will get to add the costs back to rates so customers foot the bill for these rules. New leadership in North Carolina will likely lessen these rules and if so will move DUK to the top of the list.
UTG..Reeves Utility Fund...I opined on this closed end fund earlier. The fund contains a good number of solid electric utilities as well as other stocks for solid dividend yield. Good fund for diversification of investing in this sector. For full report check out my blog for earlier posting.
I either own as a long or option SO and DUK.
No comments:
Post a Comment