Roger S. Conrad

Back in 2003, Conservative Holding Duke Energy (NYSE: DUK) was a sprawling utility conglomerate. Its global portfolio of assets included real estate management, an Ecuadorian wireless phone and Australian natural gas pipelines. That’s when management began a long transition back to its regulated electric utility roots, selling assets, paring debt and investing in rate base. And later this year, Duke will finish the journey by selling its commercial renewable energy business, turning the company’s focus squarely on its $145 billion, 10-year utility CAPEX plans.

In December 2020, I added FirstEnergy Corp (NYSE: FE) to the Aggressive Holdings on a simple premise: Investor expectations for the outcome of the Ohio bribery scandal were far too pessimistic—and a less gloomy outcome would trigger a big rebound for the stock. As it turned out, the utility’s former management was found guilty of bribing key state officials to pass legislation favorable to the company. But Ohio contributed only about 16 percent of FirstEnergy’s earnings, meaning the state needed the utility more than the other way around. And state and federal regulators have as result focusing on the executives rather than the company, allowing fresh management to repair frayed regulatory relations.

There’s no one right way to invest. The key is to seek an approach you’re comfortable with and stick to it, absorbing the best information you can find to make the best possible decisions. The approach that suits me is decidedly long-term. Mainly, I like to build positions in companies I believe will grow consistently, and when their stocks trade at what I believe to be discounted prices.

There were no additional dividend cuts in the Utility Report Card coverage universe this month. And two companies earned an exit from the Endangered Dividends List, thanks to better than expected Q1 results and guidance. NuStar Energy (NYSE: NS) is still challenged by heavy debt taken on in the previous decade. And despite minimal maturities through 2024, management will have to devote the energy midstream company’s spare cash to paring down its $4.6 billion of borrowings. That’s almost three times the stock’s current market capitalization and includes nearly $2.1 billion with variable rates.

The history of US electric, natural gas, communications and water utilities is synonymous with mergers and acquisitions. Over the 120 years or so since these services began to be essential to modern life, there have been literally thousands of mergers between operating utilities. And not one has failed to eventually create a financially stronger, more efficient and resilient company.

Is the Federal Reserve about to wrap up this tightening cycle? Many investors appear to be betting on it, with the Nasdaq 100 up almost 20 percent year-to-date.

Tech is the 21^st century’s most interest rate-sensitive sector because stocks trade on the promise of future cash flows. But traditional income stocks too enjoyed a big rebound last month: After being deep in the red, the Dow Jones Utility Average is now solidly in the black. And a substantial majority of stocks in my Utility Report Card had a positive Q1, while adding to gains so far in April.

In late January, NextEra Energy Partners (NYSE: NEP) management extended guidance for 12 to 15 percent dividend growth through calendar year 2026. That’s off a current yield of nearly 5.3 percent, implying an end of period payout on the current price of between 8.3 and 9.2 percent.

Between mid-2020 and summer 2022, shares of Aggressive Holding National Fuel Gas (NYSE: NFG) roughly doubled—for a time exceeding my “consider taking profits” level. They’ve since retreated about -25 percent and are positioned to make another run.