Utility Takeover Targets

Focus: UTILITIES

Roger Conrad Image Roger Conrad Founder and Chief Editor, Capitalist Times

Elevated valuations have prompted us to narrow our list of potential takeover targets to nine stocks, explains utility expert Roger Conrad, editor of the industry-leading Conrad's Utility Investor.

All the companies in our table have market caps that fall within the range of recent transactions. More important, we would have no problem owning these stocks if no deal materialized.

These potential takeover targets trade at reasonable valuations, increasing their appeal - although we caution that these are speculative ideas for aggressive investors.

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Artesian Resources (ARTNA) increased its dividend twice last year, thanks to a combination of customer additions, system acquisitions and investment in its regulated water utility in Delaware and Maryland.

The stock trades toward the low end of industry valuations, making the company a tempting morsel for one of the industry's bigger players. It boasts a strong balance sheet and conservative payout policy.

Abengoa (Madrid: ABG), the bankrupt sponsor of Atlantica Yield (ABY) - an aggressive income holding - received court approval to sell its 41.47 percent equity interest in the yieldco.

The big question is whether a buyer will absorb Atlantica Yield outright or assume Abengoa's role as a sponsor that drops down assets to the yieldco.Alternatively, Abengoa could market these shares publicly, a messy process that would hit the stock price hard.

On the plus side, Atlantica Yield has extricated itself financially and operationally from its parent.