Our Portfolios are a mixed bag in terms of their underlying businesses and growth drivers. But our holdings are on track for solid earnings and dividend growth over the long haul. These names don’t respond uniformly to changing business conditions or short-term market moves so diversification is key to reduce volatility.
Not one of the hundreds of regulated utility mergers over the past century has failed to create a stronger, healthier company. Despite skepticism in some quarters, Exelon Corp’s (NYSE: EXC) $6.8 billion purchase of Pepco Holdings (NYSE: POM) is also set for success.
Energen Corp (NYSE: EGN) will sell its Alabama gas distribution utility to Laclede Gas (NYSE: LG), for $1.28 billion in cash plus $320 million in assumed debt. The company will deploy the estimated $1.1 billion in after tax proceeds to further develop its high potential properties in the Permian Basin.
The Conrad's Utility Investor Portfolios have beaten benchmark interest rates since I launched on July 31, 2013 - a clear sign my recommended dividend-paying stocks follow earnings, not interest rates. And with another round of earnings due later this month, all of our companies are set to prove their worth to investors again.
As a long-time shareholder of Berkshire as well as many utilities, I’m encouraged. I’m skeptical of some of the names being floated as MidAmerican’s next potential targets. But the feature article highlights several companies that fit the mold of NV Energy and PacifiCorp, which Berkshire bought in March 2006 from the former ScottishPower.
MidAmerican earned $1.47 billion in 2013 as one of Berkshire’s “Powerhouse Five” non-insurance businesses. That was approximately 7.5 percent of the company’s overall profit, a share that will rise to around 10 percent in 2014, thanks to a full year of owning NV Energy.
Even after the next acquisition, electric utility assets will be less significant to Berkshire’s fortunes than insurance, or even railroads (20 percent of profits). But there are two clear takeaways from Mr. Buffett’s continuing interest in the power sector.
First, MidAmerican is likely to buy another utility this year, handing investors windfall gains. Second, there are regulated electricity assets that still meet the criteria of the world’s most successful value investor.
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