Roger S. Conrad

For the 20^th time since 1984, the Dow Jones Utility Average has posted positive January returns. Only in 1987 and 2015 did utilities fail to follow such a performance with an up year. Two good reasons best in class companies should succeed in 2019: More modest valuations than a year ago and strong earnings. Utility Report Card has highlights and analysis for the roughly one-third of coverage universe companies that have reported calendar fourth quarter results. So far, most have come in at or ahead of where management was guiding. There’s still a lot more news and numbers to come, including potentially make or break reports from several Conrad’s Utility Investor Portfolio recommendations. What we see will be even more critical for several Endangered Dividends List companies, which now sit on a knife’s edge between maintaining and cutting dividends. This month, I’ve again focused the Feature article on the most promising highest yielders. Returns from the last time I tried this back in August were solid on balance but a mixed bag.

When the Japanese government called for a big cut in wireless rates last year, NTT DoCoMo (Tokyo: 9437, OTC: DCMYY) was first to respond. Investors immediately assumed the worst, selling off its shares as well as those of its parent and 56.52 percent owner Nippon Telegraph & Telephone (Tokyo: 9432, OTC: NTTYY).

Last week, Verizon Communications (NYSE: VZ) sold $1 billion in 10-year green bonds at a cost that was 14 percent lower than expected. That’s just the latest demonstration of this company’s superior access to capital, even as it generates $18 billion in free cash flow this year, or twice its total dividends.

For income investors, only two things matter when it comes to returns: Are the companies we own solid on the inside and can they grow their dividends sustainably? Reliably rising dividends keep your income ahead of inflation. Stock prices always follow a rising dividend higher, just as dividend cuts always send them lower.

Dominion Midstream has merged into its general partner Dominion Energy (NYSE: D). Unitholders by now should have received 0.2492 shares of D per DM unit. Factoring in Dominion Energy’s 10 percent dividend increase and a final partnership distribution of 36.9 cents per unit paid last month, Midstream unitholders will receive approximately -6.5 percent less in 2019 distributions than they did in 2018.

Calendar year 2018 was a tough time for high yield seekers. Interest rates and Federal Reserve policy were hardly the problem. Though quite volatile, the benchmark 10-year Treasury note yield nonetheless finished about where it started. And as for the Fed, what was already the slowest monetary tightening cycle in history has basically stalled out.

Roger Conrad will host an online chat for Conrad's Utility Investor subscribers on February 14, 2019 at 2 PM Eastern time.