After briefly rising over 1,000 for the first time, the Dow Jones Utility Average is in the black this year. That means essential service companies, including big communications stocks, are outperforming pretty much everything this side of oil and gas.
Electric, gas, energy infrastructure, water and communications service providers are the kind of substantial, reliable, dividend paying companies investors like to hold in turbulent times. And early 2022 certainly qualifies, with the highest inflation in 40-plus years, a diminished but lingering pandemic, continuing supply chain disruption and now a full-on war.
Stocks with sustainable 5 to 7 percent annual dividend growth: That’s how we’ll beat the current 40-year high in inflation, which pretty much caught the world’s central bankers napping.
The best place to hunt for companies to do that job is my Utility Report Card coverage universe—and particularly the stocks I recommend in the Conrad’s Utility Investor Portfolios.
Normally six months into a new quarter, the vast majority of companies I track would have released earnings and updated guidance. End-year filing requirements will extend the Q4 reporting period well into next month. But from what I’ve seen so far, the best in class are well on track to continue raising dividends faster than the current rate of inflation—and some much faster like Conservative Focus stock NextEra Energy Partners (NYSE: NEP) at 15 percent plus.
Credit whatever you want for breaking the logjam in the US Congress. But starting next year, US electricity, natural gas, telecom and water utilities will enjoy unprecedented federal government largesse to support capital spending plans, courtesy of the $1.2 billion infrastructure law passed last week with bipartisan support. The August feature article archived on the CUI website highlights my list of winners from the coming spending boom. They include well-placed developers of renewable energy and hydrogen, broadband deployers and utility construction companies.
From Winter Storm Uri to Hurricane Ida, extreme weather is the emerging big story for utilities in 2021, just as the pandemic was last year. And now as then, well-executed responses are absolutely essential.
New Orleans-based Entergy Corp (NYSE: ETR) arguably has the most on the line at this time. The Portfolio section discusses its prospects, as well as those of other storm-hit utilities.
My other big theme this month is income. Borrowing rates for Utility Report Card companies are still near multi-generation lows, which means slim pickings for fixed income. But the Feature article shows there are still big, safe yields in less obvious places.
“Unpacking” earnings for key details became a popular catch phrase for analysts during Q2 reporting season. And that’s exactly what I do in this August issue of CUI: Utility Report Card highlights vital signs for the 90 percent or so of coverage universe companies that have turned in numbers and updated guidance, while the Portfolio section focuses on my top recommendations.
I dig deep into results to answer two critical questions. First, are companies still moving in the right direction with strategic plans and balance sheet health? And second, are business developments adequately reflected in share prices, meaning are there opportunities for upside or should we be moving on?
America’s electric utilities are on track for a 10th consecutive year of record capital spending in 2021, according to numbers compiled by the Edison Electric Institute.
That’s closely followed by the $70 billion plus the country’s five largest communications companies plan to spend this year, rolling out 5G wireless and expanding fiber broadband connections. And while pipeline construction remains highly contentious in many places, spending on gas and water systems also remains at elevated levels.
Bloomberg New Energy Finance reports 5.8 gigawatts of operating US solar generation is now co-located with energy storage as of May 2021. And there’s another 28 GW combined with 39 GW hours of battery storage in some stage of permitting and securing financing for start up in the next couple years. Including storage capacity at facilities is the biggest step yet tackling what’s still solar energy’s biggest hurdle to growth, intermittency. And as battery technology develops, the industry will near its ultimate goal of making solar plus storage actually dispatchable to grid operators.
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
Harness the tried and true wealth-building power of rising dividends.
Nothing compounds wealth like reinvesting a rising stream of dividends.
Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.