Feature Article

It’s been a difficult couple of years for AGL Energy (ASX: AGL, OTC: AGLXY), Australia’s largest power producer and electricity retailer.

First came the National/Liberal Party federal government’s aggressive reaction to rising prices for natural gas and electricity—a trend AGL had correctly bet on that resulted from a dramatic increase in the country’s LNG exports.

A sharp run up to new all-time highs, followed by a steep one-week plunge that’s leveled off for now between the high and low: That’s where the Dow Jones Utility Average has travelled since the February issue posted.

Aggressive Holding China Mobile (Hong Kong: 941, NYSE: CHL) was our worst performing stock last year. But China’s largest communications company looks set to deliver much stronger returns going forward.

Intense competition, hefty capital spending needs and erratic regulation have made the communications sector an investment minefield. But Conservative Holding Comcast Corp (NSDQ: CMCSA) remains a model of consistency, adding new business while growing cash flow and dividends.

n the early stages of a bull market, it doesn’t matter so much when you buy but what. The key is load up on high quality stocks that are weathering the relevant economic and sector stress test.

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.