The aftermath of a dividend cut is always an emotional time, especially for investors who own the stock in question. But if you can keep a level head and evaluate the company’s proposed turnaround effort, you can find deep-value plays poised for big returns—a rarity in a five-year-old bull market.
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.
The massive loss T-Mobile USA (NSDQ: TMUS) reported this week hasn’t slowed the hyperactive tweeting of its CEO John Legere. Nor apparently has the news scared off his groupies on Wall Street, though that may have more to do with continuing takeover speculation.
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
Harness the tried and true wealth-building power of rising dividends.
Nothing compounds wealth like reinvesting a rising stream of dividends.
Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.