Feature Article

Energy pipelines are the highest yielding sector in our Utility Report Card coverage universe. Ironically, after a five-year bear market, dividend risk is actually quite low for the handful of companies and master limited partnerships we track.

In investing, it’s common for good years to follow good years, and great years often follow average or poor ones. But historically great years like what we’ve just enjoyed at Conrad’s Utility Investor rarely if ever come back to back.

16 Utility Report Card companies reduced their dividends in calendar year 2019. That compares to 128 raising payouts, 23 that held them level and 27 that currently pay no dividend.

In February 2018, I recommended Edison International (NYSE: EIX) as a new Aggressive Holding. Shares had taken just a big hit on concern the company would be held liable for billions in 2017 wildfire damages under the state’s “inverse condemnation” law.

When Vistra Energy (NYSE: VST) emerged from the TXU bankruptcy in late 2016, we weren’t optimistic. Wholesale electricity prices were in a multi-year slide, and the economics of the company’s coal heavy assets were eroding even faster.

Competition from “associated” natural gas in Texas and scarce takeaway capacity are weighing on the price of natural gas produced in Appalachia. That’s triggered a meltdown of regional producers in 2019, including a 50 percent plus decline in the largest, EQT Resources (NYSE: EQT).

After a decade as the primary focus of utility M&A, regulated assets don’t come cheap. But when a high flyer drops back to a good entry point, we jump. And that’s now the case for natural gas distributor South Jersey Industries (NYSE: SJI).

Only four of the 21 current Conservative Holdings trade below our maximum recommended entry point. That’s counting new addition and this month’s conservative focus stock South Jersey Industries (NYSE: SJI).

It’s survival of the fittest in the communications sector. And as rising competition, surging capital spending and tough regulation shrink free cash flow, the wave of dividend cuts is hitting all but the largest and strongest players.

Cheap to mine, easy to burn and abundant almost everywhere: It’s easy to see why coal became the primary fuel for a century plus of global electrification. In fact, up until very recently, demand growth was actually accelerating.