Portfolio of Electric Utilities StocksWell-managed electric utilities are excellent candidates for a dividend reinvestment portfolio. Typically, electric utilities generate lots of excess cash and pay it out as dividends to shareholders.
Look for a company that has consistent earnings growth, a long history of rising dividends and a reasonable payout ratio, which is the ratio of dividends to earnings. A low payout ratio (less than 70 percent) indicates the possibility of future dividend increases. A very high payout ratio (greater than 90 percent) may not be sustainable and may signal a dividend cut in the future.
If the dividend yield (annual dividend divided by stock price) is very high (greater than six or seven percent) the company may have problems - the high yield may be due to a low stock price. Be very wary of stocks with high dividend yields and high payout ratios.
The following table includes 12 electric utilities that have multiyear histories of increasing their dividends. These stocks are worth considering for a dividend reinvestment portfolio.
|12 Dividend-Paying Electric Utilities Stocks|
Stock Return & Price Chart
Dividend (Yield) &
Recent Dividends &
|American Electric Power||AEP||$2.68 (2.93%)|
|Consolidated Edison||ED||$2.96 (3.30%)|
|Dominion Resources||D||$3.67 (4.67%)|
|Duke Energy||DUK||$3.78 (4.03%)|
|Eversource Energy||ES||$2.14 (2.60%)|
|Hawaiian Electric Industries||HE||$1.28 (2.90%)|
|NextEra Energy||NEE||$5.00 (2.29%)|
|PPL Corporation||PPL||$1.65 (5.34%)|
|Southern Energy||SO||$2.48 (4.12%)|
|Wisconsin Energy||WEC||$2.36 (2.59%)|
|Xcel Energy||XEL||$1.62 (2.59%)|
|Dividend data from Quandl as of Sep-14-2019.|
To inspect the performance of the Dividend-Paying Electric Utilities Stocks portfolio, see the chart below. Portfolio values are computed using monthly closes for stocks from Quandl.All 12 stocks are included in the portfolio computations. The current value of the portfolio assumes that $833.33 was invested (total of $10,000) in each stock at its closing monthly price for the first date shown on the portfolio value chart below. All prices are adjusted for splits and dividends.
The current value of a $10,000 investment is $38,351. The percent return is 283.51%. The annualized return is 14.39%.
|Return Summary for Dividend-Paying Electric Utilities Stocks|
|Current Value of Investment||$38,351.01|
|Number Profitable Returns||7,051|
|Percent Profitable Returns||97.12%|
|Number Unprofitable Returns||209|
|Percent Unprofitable Returns||2.88%|
|Profitable to Unprofitable Returns Ratio||33.74|
NOTE: The stocks included in the tables and chart are representative of the industry. They are not recommendations.