Some investors love utilities, others hate them. I am somewhere in the middle. I never invested money into the utility sector because I know that strong growth is nearly impossible at low investment cots. So you should not get a quick big return.
The only chance to make money is with time optimized stock trading. But that's too complicated for me and means hard work. I love to buy high-quality growth stocks to receive the dividends without having to worry about keeping an eye on anything.
The good thing about utilities is that they generate stable cash flows and can use the incoming money to pay high dividends and repurchase shares. I believe that it makes more sense to buy bonds of those companies because if the company gets into trouble, the dividend payments and share buyback programs will be reduced first. Bondholders suffer last.
I made a list of the 20 best stocks -- excluding those with a market capitalization below USD 2 billion -- because I think the risk should be much higher than for mid-capitalized stocks.
- National Grid (NGG) has a market capitalization of $40.78 billion. The company employs 25,645 people, generates revenue of $22.229 billion and has a net income of $3.275 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $7.619 billion. The EBITDA margin is 34.28% (the operating margin is 25.08% and the net profit margin 14.73%).
Financial Analysis: The total debt represents 48.64% of the company’s assets and the total debt in relation to the equity amounts to 249.22%. Due to the financial situation, a return on equity of 22.25% was realized. Twelve trailing months earnings per share reached a value of $5.08. Last fiscal year, the company paid $3.16 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 11.02, the P/S ratio is 1.87 and the P/B ratio is finally 2.86. The dividend yield amounts to 5.52% and the beta ratio has a value of 0.62.
- Edison International (EIX) has a market capitalization of $15.04 billion. The company employs 19,930 people, generates revenue of $12.760 billion and has a net income of $24.00 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2.209 billion. The EBITDA margin is 17.31% (the operating margin is 2.51% and the net profit margin 0.19%).
Market Valuation: Here are the price ratios of the company: The P/E ratio is not calculable, the P/S ratio is 1.18 and the P/B ratio is finally 1.50. The dividend yield amounts to 2.93% and the beta ratio has a value of 0.58.
- Northeast Utilities (NU) has a market capitalization of $12.31 billion. The company employs 6,063 people, generates revenue of $4.465 billion and has a net income of $400.51 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.096 billion. The EBITDA margin is 24.55% (the operating margin is 17.78% and the net profit margin 8.97%).
Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.64, the P/S ratio is 2.79 and the P/B ratio is finally 1.75. The dividend yield amounts to 3.46% and the beta ratio has a value of 0.45.
Take a closer look at the full list of the best buy rated utilities. The average P/E ratio amounts to 28.43 and forward P/E ratio is 21.15. The dividend yield has a value of 2.78%. Price to book ratio is 2.63 and price to sales ratio 1.87. The operating margin amounts to 13.51% and the beta ratio is 0.79. Stocks from the list have an average debt to equity ratio of 2.56.
Related stock ticker symbols:
CIG, NGG, LNT, IDA, NU, UGI, TRGP, OKE, EIX, OGE, SBS, AWK, NRG, AES, EQT, HNP,
ELP, CPN, KEP, WGP
Utilities with a buy or better rating originally published at long-term-investments.blogspot.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.