Feature Article
Southern Company: Poised for Post-Vogtle Growth
By
Roger S. Conrad on
May. 9, 2024
In late April, Georgia Power’s unit 4 of the Vogtle nuclear plant entered full commercial service—joining Unit 3, which has been operating smoothly since last July. And with customer rates to pay for the facility fully in place, the book is now finally closed on a construction project that began in August 2008 and ultimately cost $30 billion, versus initial estimates of $14 billion.
During Southern’s Q1 earnings and guidance call earlier this month, CEO Chris Womack stated unequivocally his view that the US “is going to need more nuclear.” But he also said “we’re going to celebrate what we’ve done at Vogtle for a very long time before we give any consideration” to launching another project.
AT&T Inc: “Showing” In the US Telecom A Winner for Investors
By
Roger S. Conrad on
May. 9, 2024
When a stock sells for just 7.7 times expected next 12 months earnings, it’s clearly unloved by investors. And that’s clearly the case for America’s number 3 telecom AT&T Inc (NYSE: T), after returning less than 3 percent a year over the past decade.
There are numerous reasons for AT&T’s underperformance. But the biggest was US government rejection of its proposed merger with T-Mobile US (NSDQ: TMUS), which led to a disastrous, debt-expanding foray into the entertainment business. And the company has dealt with the fallout ever since, including a first-ever -46.6 percent dividend cut as part of the Warner Brothers (NSDQ: WBD) spinoff in April 2022.
Strong Q1 Results Portend Solid Returns
By
Roger S. Conrad on
May. 9, 2024
Roughly 3 in 4 Utility Report Card companies have released their calendar Q1 results and updated guidance. Most of the rest should do so in the next week to 10 days.
This issue’s company-by-company URC comments highlight what investors need to know about the results so far. That includes the 29 portfolio utilities issuing their numbers. And I’ll have my thoughts on the rest in next’s month’s issue, or beforehand for portfolio recommendations if action is needed.
Uniti Group Buckles, UGI Corp Off the List
By
Roger S. Conrad on
May. 9, 2024
Debt remains the number one threat to essential service dividends. The latest to fall victim: Telecom infrastructure company Uniti Group (NSDQ: UNIT).
This month Uniti announced it will merge with privately held Windstream Holdings, its former parent and still largest customer by far. Management says the union will create the “premier insurgent fiber provider.” But this is really a cost-cutting and debt reduction deal: The companies target $100 million in operating expense cuts and “$20 to $30 million” in capital spending “synergies.”
Best Renewable Energy Stocks to Bet on an Emerging Recovery
By
Roger S. Conrad on
May. 9, 2024
For the first time ever, solar energy accounted for “more than half” of US electricity generation additions in 2023: That’s from a report released this week by Wood MacKenzie and the Solar Energy Industries Association.
Total installed capacity was also a record at 32.4 gigawatts. That was up 51 percent from 2022 levels and 37 percent above 2021, the previous record year for solar installation. And utility-scale dominated at 69 percent of the total.
CMS Energy: Executing Growth at a Good Price
By
Roger S. Conrad on
May. 9, 2024
Utility strong is what you get with Conservative Holding CMS Energy (NYSE: CMS). The stock’s 10-year compound annual return is a solid 10.5 percent. And it’s 15.4 percent for the last 21 years—which began with a management switch and refocus on boosting efficiency, cutting debt and staying on the same page with Michigan regulators.
That’s been the formula for success ever since. In early February, CMS released 2023 results that topped the company’s recently raised targets. Management boosted the mid-point of the 2024 earnings guidance range to $3.32 per share, affirming expected annual growth of 6 to 8 percent through 2028 “with continued confidence toward the high end of the range. The company also raised dividends by 5.7 percent, the same rate of growth as in 2023 and an increase of 90.7 percent from ten years ago.
EverSource Energy: Blown By Offshore Wind But Still on Course
By
Roger S. Conrad on
Apr. 3, 2024
Earlier this year, what promised to be an Atlantic Coast offshore wind boom seemed to go bust. Lead developer Orsted A/S (Denmark: ORSTED, OTC: DNNGY) ousted upper management and wrote off $6 billion in shelved US projects, citing development cost spikes and uneconomic contracts. And its 50 percent partner EverSource Energy’s (NYSE: ES) felt its pain, taking a $5.58 per share impairment charge against Q4 earnings.
EverSource’s plan all along has been to sell its ownership of the offshore projects to focus on linking transmission infrastructure. The writedown reflected the diminished value of those assets. But it now appears the demise of US offshore wind was indeed greatly exaggerated.
When Performance is Jagged Balance is Best
By
Roger S. Conrad on
Apr. 3, 2024
To pivot or not to pivot—That’s the question the Federal Reserve continues to ponder in spring of 2024. Every stray data point on inflation seems to heighten the sense of inertia. And with benchmark interest rates indeed staying higher for longer, investors’ fear of debt and general disinterest in dividends persists.
But there are signs sentiment is at last starting to shift. Changing allocations and a highly volatile quarterly payout makes the iShares Select Dividend ETF (NYSE: DVY) a poor proxy or substitute for a well-chosen portfolio of dividend stocks. But the ETF does follow the Dow Jones Select Dividend Index of 99 high yielding stocks and has definitively resumed the uptrend it began in late October.
Debt’s Still a Threat But Waning
By
Roger S. Conrad on
Apr. 3, 2024
In this month’s Utility Report Card, I highlight how companies stack up on each of our Quality Grade criteria. One big takeaway on balance sheet risk: Higher for longer interest rates are a much-diminished risk to dividends.
Companies are still paying more to refinance debt. But long-term borrowing costs are actually lower than where they began 2023 for most companies. And the result is the wave of debt offerings highlighted in URC comments, particularly of 10 years maturity and greater.
Day of the Data Center: Powering Utility Profits
By
Roger S. Conrad on
Apr. 3, 2024
Electricity and fiber broadband: They’re critical elements for the exploding number of “hyper-scale” US data centers, which in turn are vital for the proliferation of artificial intelligence applications.
At the nexus of both power and fiber are two sectors that to date have been largely ignored by many investors: Electricity and Communications utilities.
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