Utility Forecaster Powers up Chesapeake Utilities

12/09/2020 5:00 am EST


Robert Rapier

Editor, Investing Daily

Chesapeake Utilities (CPK) — a holding in our model Growth Portfolio — beat earnings expectations, and despite the pandemic, reported higher year-over-year sales and earnings, observes income expert Robert Rapier, editor of Investing Daily's Utility Forecaster.

Chesapeake Utilities is involved in natural gas transmission and distribution; electricity generation and distribution; propane gas distribution, and mobile compressed natural gas (CNG) services.

Chesapeake Utilities also recently announced plans for an investment into renewable natural gas. This is a partnership with CleanBay Renewables in support of developing a renewable biogas plant in Westover, Maryland.

The facility will produce pipeline quality renewable natural gas and organic fertilizer from chicken waste. The gas will be fed into Chesapeake’s pipeline system for distribution.

A regulated utility generally offers more income certainty, while unregulated businesses offer more upside potential — but also more risk. In reality most utilities have a mixture of regulated and unregulated businesses.

In 2019, 71% of Chesapeake’s $480 million in revenue came from its regulated businesses. These regulated energy businesses include natural gas distribution and transmission operations on Delaware’s Delmarva Peninsula and in Florida, and electric distribution operations in Florida.

Chesapeake’s unregulated energy businesses include its propane distribution operations, mobile gas transport services, natural gas infrastructure in Ohio, and a combined heat and power plant on Amelia Island in Florida.

Chesapeake has paid dividends to its shareholders for 60 consecutive years. It has never cut its dividend during the time span. In 2019, the company increased its dividend by 8.6%.

Over the past five years the company’s share price has risen annually by 4.0% more than the S&P 500 on average, and 7.8% higher on average than its peers in the utility industry.

It has grown its earnings per share by 8.0% per year on average. Those metrics reflect the higher level of unregulated businesses in the company’s portfolio. Chesapeake Utilities is a Buy below $105 in our model Growth Portfolio.

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