Well-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 be in trouble
- 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 electric utilities with solid dividends.
These stocks are worth considering for a dividend reinvestment portfolio.
| Electric
Utility Portfolio |
| Company |
Quote |
Annual Dividend |
Dividend Yield |
| Central Vermont |
|
$0.92 |
3.30% |
| Constellation Energy Group |
|
$1.74 |
1.80% |
| Dominion Resources |
|
$3.16 |
6.70% |
| DPL Inc |
|
$1.04 |
3.50% |
| Duke Energy |
|
$0.88 |
4.40% |
| Exelon Corporation |
|
$1.76 |
2.10% |
| FPL Group |
|
$1.64 |
2.40% |
| Hawaiian Electric Industries |
|
$1.24 |
5.30% |
| Progress Energy |
|
$2.22 |
5.00% |
| Public Service Enterprise Group |
|
$2.34 |
2.50% |
| SCANA Corporation |
|
$1.76 |
4.10% |
| Southern Company |
|
$1.61 |
4.20% |
| Wisconsin Energy Corp |
|
$1.00 |
2.00% |
| NOTE: Dividend data are from finance.yahoo.com
as November 29, 2007. |
The iShares
Dow Jones US Utilities (IDU)
tracks the Dow Jones Utilities Average.
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