As has been the case for several months, because of the lack of split announcements, I have been obliged to search for promising companies for our model portfolio outside the universe of stock splits, explains Neil Macneale, editor of the 2-for-1 Stock Split Newsletter.

Applying all the screens to the broad market that I usually use to rank a list of splits, I have come up with quite a few companies that meet all my criteria except for their lack of a split announcement. Because of the current economic and political climate, I have also added screens that favor a more defensive outlook.

NorthWestern Corp. (NWE) is a South Dakota utility that fills the bill and will be added to the 2 for 1 portfolio. NorthWestern is an energy company primarily focused on regulated gas and electrical sales and distribution in the upper mid-west.

Established in 1923, NWE supplies gas and electricity to approximately 700,000 customers in Montana, South Dakota and Nebraska. With its 95 year history and a beta of 0.37, I would say NorthWestern is about as stable an investment as one could find in today’s environment.

As is common for utilities, there is lots of debt, but NWE’s balance sheet is significantly stronger than the average for its industry. Other highlights include a PE of 16.4, a dividend yield of 3.6% and a steady net profit margin of over 10%/yr.

This is a relatively small utility with relatively few customers spread over a sparsely populated portion of the country. In spite of these conditions, NorthWestern seems to have built a profitable but conservatively managed business.

Conservative, yes, but keeping up with the times with renewable energy sources providing an ever increasing part of the power mix.

Wind now supplies over 25% of the power sold by NorthWestern in South Dakota and wind and hydro combined generate 56% of the power sold in Montana. I like the company even though I doubt it will be a home run. Right now, I’ll settle for a single.

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