3 Utilities Picks with Differing Appeals

Brittney Barrett  |

Utility stocks tend to be where investors head when they’re looking for a little stability in their portfolio. For the mos the utilities sector is comprised of mature companies with relatively firm prices and major dividends, but there are some exceptions to the rule. Those looking to invest in several utilities stocks, some with growth potential and others with more traditional assets, like major dividends, in order to achieve balance in the sector should look no further. Endesa Chile (EOC), is an electricity generator with operations in Colombia, Argentina, Peru, Brazil and Chile. Then there is Ameren Corporation (AEE) which through its subsidiaries, operates as a public utility holding company in Missouri and Illinois. Ameren has a solid business in rate-regulated electric generation, transmission, and distribution as well as rate-regulated natural gas transmission and distribution businesses; and merchant generation businesses. The company falls into the category of a more traditional utility in that is offers considerable dividends and was founded 130-years ago in Missouri. The third company on this list represents a strong company with big dividends but also future possibilities. Duke Energy Corporation (DUK) is an American Energy company operating in U.S. franchised electric and gas, commercial power, and International energy. Early this year, Duke announced in conjuction with Progress Energy a plan to combin their companies. The deal remains subject to shareholder and regulatory approval,  but would with upwards of 7 million customers in six service territoriescreate the worlds largest utility company. The deal is expected to be complete by the end of this year.


First let’s discuss Endesa Chile (EOC). Endesa Chile is appealing for two reasons: the fact that it appears to be growing and that it looks somehwhat undervalued. Earnings are anticipated to increase by 10 percent this year and 9 percent next year, which is major growth compared to other companies in the sector which, on a good year, average 3 or 4 percent growth. There is an emerging market and demand in this area of the world for utilities and Endesa Chile appears to be on its way to fulfilling it. This could position it for growth in the coming years and solid revenue long-term. The stock is currently selling for around $55, below its 52-week high of $58.42 but not far off it. The company has revebue of $4.9 billion last year with a dividend yield of $4.7 percent. It is currently trading at around 13 times earnings.


Ameren (AEE) reported first quarter earnings on May 5th and took a hit. Net income fell by 30 percent in the quarter that ended March 31,  as a result of certain weather conditions, leaving the company with a reported net income of $71 million versus $102 million in the year earlier period. Such a massive loss would be thought to really deteriorate a lesser company or one in another sector but Ameren’s share prices never fell below $23 from a 52-week peak of about $29. That represents a solid company with devoted investors making it a good stable choice for a portfolio that is underweight in the utilities department. The company’s current dividend yield is 5.29 percent or an annual dividend $1.54, and last quarter dividend of $0.39. The company has already beat its median and high target as of trading today.


Duke Energy Corporation (DUK)- Duke is essentially what you could expect in a utilities company but their latest agreement represents significant growth possibilities. With the deal that would make it the largest global utilities company anticipated to close by the end of the year  larger dividends could be on the horizon. Already the company offers dividend yield of 5.24 percent of $0.98 annually. Duke is also relatively cheap for its size with a market cap of 25.27 billion and a P.E ration of 18 times earnings. Like Ameren it is stable and in spite of minor losses a result of mild winter conditions last quarter there hasn’t been a huge change in share price. The companies 52-week high is $19.08 with a 52-week low of $15.47. If the deal goes smoothly, the company looks to have the potential to reach new heights.




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