Steady performance along with stable earnings and cash flow enable Utility companies to reward investors through regular dividend payouts. This is why these stocks are safe investment options.
Mature and regulated utility companies provide basic services, while investing in infrastructures. They are dependent on financial organizations for funds and thus, rate cuts are beneficial for them. Since July 2019, three rate cuts have boosted the sector and enabled companies to borrow funds at lower rates.
For 2020, we suggest that investors should hold on to utility stocks that have returned more than their broader industry in the past 12 months. Moreover, these stocks have paid out higher dividends than the industry and Zacks S&P 500 composite as well as have long-term investment plans to expand their businesses.
In this write up, we run a comparative analysis on two Zacks Utility - Electric Power industry stocks — Edison International (NYSE:EIX) and PPL Corporation (NYSE:PPL) — to ascertain a better option to hold on to now. Both the stocks currently carry a Zacks Rank #3 (Hold). Edison International and PPl Corp have market capitalization of $26.97 billion and $25.68 billion, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
In the past 12 months, shares of Edison International and PPL Corp have gained 32.5% and 25.4%, respectively, compared with the industry’s growth of 21.7%.
ONE YEAR
Dividend Yield
Currently, the dividend yield for Edison International is at 3.26%, lower than 4.65% for PPL Corp. Both the companies’ dividend yield is better than the industry’s 2.79% and Zacks S&P 500 composites’ 1.78%.
Surprise Trend
Earnings of Edison International and PPL Corp have outpaced the Zacks Consensus Estimate in the trailing four quarters, the average being 0.09% and 1.40%, respectively.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE in the trailing 12 months for Edison International and PPL Corp was 11.98% and 14.73%, respectively. Both the companies have outperformed the industry’s ROE of 9.47%.
Growth Projections
The consensus mark for Edison International’s 2020 earnings is pegged at $4.59 per share on revenues of $13.10 billion. The bottom-line figure suggests a 3.32% year-over-year decline. The same for the top line calls for a 3.12% rise on a year-on-year basis.
The consensus mark for 2020 earnings for PPL Corp is pegged at $2.54 per share on revenues of $8.14 billion. The bottom-line estimate suggests a 4.53% year-over-year increase. The same for the top line implies a 3.36% increase year on year.
Outcome
The companies are providing quality services to customers as well as have plans to invest heavily to upgrade and strengthen infrastructure. The additions and expansion of infrastructure will enable these two utilities to serve their increasing customer base more efficiently. Edison International currently intends to invest $8.90-$9.10 billion between 2019 and 2020. PPL Corp is on track to invest nearly $15 billion through 2019-2023.
Markedly, it is evident from these above comparisons that PPL Corp stock to retain in your portfolio.
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Edison International (EIX): Free Stock Analysis Report
PPL Corporation (PPL): Free Stock Analysis Report
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