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Feature Article

BCE Inc: The Yield’s Not Nearly As Risky as It Appears

By Roger S. Conrad on Aug. 5, 2024
When leading Canadian telecom BCE Inc (TSX: BCE, NYSE: BCE) released initial 2024 guidance, many took it as evidence restrictive regulation and escalating competition were undermining growth and dividends. And the stock has generally underperformed since. Nonetheless last week, for the second consecutive quarter, management held firm on guidance in what it again referred to as a “transformational year.” Free cash flow improved by 8 percent to CAD1.1 billion, or CAD200 million after dividends. And the company posted its second best retail Internet net subscriber additions since 2007 and most wireless customer additions in "almost two years" (up 4.4 percent).

Hannon Armstrong: Scaled Up to Grow

By Roger S. Conrad on Aug. 5, 2024
From April 2016 through January 2021, we earned roughly 300 percent on Hannon Armstrong Sustainable Infrastructure (NYSE: HASI). We took that profit. But when the stock dropped by more than half during a successful business year, I couldn’t resist re-entry. And despite growing revenue 78 percent, net income 50 percent and dividends by18.5 percent, the company has been the portfolio’s worst performer since.

With Utility Stocks Rising Don’t Take Your Eye off Earnings

By Roger S. Conrad on Aug. 5, 2024
The Dow Jones Utility Average lagged the S&P 500 by 12.5 percentage points in the first half of 2024. But the first month or so of Q3 has witnessed a dramatic reversal of fortune: It’s utilities beating the broad market average by more than 14 points. And the DJUA is more than 18 points ahead of the Big Tech stocks in the Nasdaq 100. There are several reasons why this great rotation will continue. First, after roughly a year and a half of underperforming the broad market and Big Tech in particular, utility stocks are greatly under-owned by giant passively and actively managed investment portfolios that dominate the market.

Telecom Dividends at Risk

By Roger S. Conrad on Aug. 5, 2024
Uniti Group (NSDQ: UNIT) now expects to close its proposed merger with privately held Windstream Holdings in “second half 2025.” At that time, management has said it will drop its REIT structure and eliminate its dividend. This implies the company will make at least four more payment at the current rate of 15 cents per share—one-year income return of almost 15 percent. But lest anyone be tempted, consider the following.

America’s Nuclear Renaissance: Changing Times Bring Opportunity

By Roger S. Conrad on Aug. 5, 2024
Nuclear power has rarely been a popular subject in the 40 years or so I’ve analyzed, advised on and invested in electric utilities. That’s understandable. The plants built in the 1970s and 80s wound up costing several times their initial budgets. State regulators forced utilities to eat billions of cost overruns. And what rate increases did get through triggered the large customer revolt that spurred deregulation in 15 states, along with the District of Columbia.

Enel SpA: Low Debt, Robust Renewables and a Nuclear Play

By Roger S. Conrad on Jul. 8, 2024
Italy closed the last of its operating nuclear reactors in 1990, following a 1987 post-Chernobyl referendum. But earlier this year, Enel SpA (Italy: ENEL, OTC: ENLAY) and Ansaldo Nucleare forged an agreement to develop new nuclear reactors, with support of the country’s Ministry of Environment and Energy Security. Enel’s Endesa unit operates several reactors in Spain, which at this point has a plan to phase out nuclear energy by 2035. But like Italy, the country is now reconsidering its options. And as the largest power producer in both countries, the company is poised to capture what business emerges.

Entergy Corp: Conservative and Cashing in on Nuclear’s AI Connection

By Roger S. Conrad on Jul. 8, 2024
Conservative Holding Entergy Corp (NYSE: ETR) has been a fully regulated utility for more than two years—divesting its Palisades nuclear plant in Michigan in June 2022 to Holtec International. The result is reduced business risk, a stronger balance sheet and exclusive management focus on growing regulated rate base in the utility’s four-state territory. Annual industrial load growth is the strongest in America averaging 8-9 percent annually. And it’s likely to accelerate the next few years, spurred by “onshoring” to the US Gulf Coast, electrification, artificial intelligence-enhanced data centers (5-10 gigawatts demand projected) and rapid growth of LNG export infrastructure.

A Solid First Half but Better Ahead

By Roger S. Conrad on Jul. 8, 2024
Utility stocks had their moments in first half 2024. But with the Federal Reserve sticking to a “higher for longer” interest rate policy, it’s little surprise the Dow Jones Utility Average finished the first six months of the year well behind broader stock market averages, lagging the S&P 500 by 12.5 percentage points. Boosted mainly by strong performance of four stocks—Constellation Energy (NYSE: CEG), MDU Resources (NYSE: MDU), NextEra Energy (NYSE: NEE) and Vistra Corp (NYSE: VST)—the Conrad’s Utility Investor model portfolios did somewhat better.

Why NextEra Energy Partners Won’t Cut

By Roger S. Conrad on Jul. 8, 2024
Most companies view dividend cuts only as a last resort. That’s for good reason. Investors rightly view slashing payouts as management breaking faith, even when there are very good reasons. Just ask Kinder Morgan Inc (NYSE: KMI) founder and largest shareholder Richard Kinder. His stock sells for half what it did in late 2015 before the midstream company cut dividends by 75 percent, despite a 130 percent increase since.

Picks and Pans for Second Half 2024

By Roger S. Conrad on Jul. 8, 2024
Nuclear power has officially joined cutting debt, M&A and artificial intelligence as primary drivers of utility and essential services stock returns in 2024. In contrast, high debt and renewable energy have remained broadly unpopular as themes in the first half of the year, as they were in 2023. As my table “Best and Worst of 2024” highlights, divergence between individual company performance in the Conrad’s Utility Investor coverage universe remains quite wide. The best first half performer by far was Vistra Energy (NYSE: VST) with a 124.34 percent total return. The worst was FuelCell Energy (NSDQ: FCEL), where survival-motivated share dilution resulted in a -60.08 percent loss.

MODEL PORTFOLIOS & RATINGS

ABOUT ROGER CONRAD

Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. Roger b