Conservative Income Feature

It’s hard to believe that 20 years ago CMS Energy (NYSE: CMS) was a pariah in its home state of Michigan. The long-time CEO had exited in disgrace, after spectacularly failing to convert the electric and gas utility into a mini-Enron. And the company was floundering in debt and bad will from regulators and customers.

The best network will win the most business: That was the underlying premise behind Verizon Communications’ (NYSE: VZ) successful rise to become America’s largest wireless company, as the leader of the previous decade’s 4G revolution.

Centerpoint Energy (NYSE: CNP) has been a big winner since we entered its convertible preferred stock in mid-2020, following a 48 percent cut in the common dividend. Now with shares trading at a premium valuation of 22 times expected next 12 months earnings, it’s fair to ask how much more upside we can realistically expect.

In the December 2021 feature article, I noted the S&P Telecoms Index traded at a bear market valuation 9.4 times earnings, excluding a handful of technology names like Alphabet Inc (NSDQ: GOOGL). If anything, investors’ gloomy consensus on the sector has thickened since, with every communications company but one in our coverage universe losing more ground.

NextEra Energy Partners (NYSE: NEP) joined our Conservative Holdings in May 2016. Since then, its dividend has increased by 122 percent. That includes 15.1 percent over the last 12 months, which pushed the yield on our initial investment to nearly 10 percent.