Utilities Back in Vogue

02/09/2007 12:00 am EST

Focus:

Charles Carlson

Editor, DRIP Investor

Dividend expert Charles Carlson is beating the utility bandwagon. Going westward, he tenders insight into the shares of two resources companies in rapidly-expanding service areas that are paying nice dividends and offering dividend reinvestment plans...

"PNM Resources (PNM NYSE) is the parent company of Public Service Company of New Mexico. The firm sells electricity (approximately three-quarters of revenue) and natural gas (25%). The firm expanded its operations with the 2005 acquisition of TNP Enterprises. The company's service area is growing at a healthy clip. Dividend growth should exceed the industry average. The stock, yielding nearly 3%, offers a good choice among electric utilities.

"Minimum initial investment in PNM's direct-purchase plan is just $50. Subsequent investments also carry a minimum $50. Purchase fees are just $0.06 per share. Selling fees are $15 plus $0.06 per share. Non-US residents are eligible to participate in the plan. If you own less than 100 shares, your dividends will be automatically reinvested unless you tell the transfer agent that you want to receive dividends. The maximum investment in the plan is $100,000 per year. However, investors who would like to make investments in excess of $100,000 may seek a waiver from the company. A request for waiver form is available by calling (201) 680-5300. Investments in excess of $100,000 may receive a discount of up to 3%. The plan administrator is Mellon Investor Services. For enrollment information call (877) 663-7775 or visit Mellon online at www.melloninvestor.com.

"I especially like MDU Resources (MDU NYSE), which provides gas and electricity services in North Dakota, Montana, South Dakota, Minnesota, and Wyoming. The company also is involved in oil and gas production, mining, and construction materials production. Dividend growth has been solid, and the firm is likely to boost its dividend at least 4% later this year. The issue's yield of 2.1% is not huge, but the stock's dividend growth and appreciation potential should generate meaningful total returns for shareholders.

"The stock represents an excellent choice among utility investments. MDU's direct-purchase plan is extremely user friendly. The plan has a minimum initial investment of $250. The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $25 for at least 10 weeks. Partial reinvestment is available. Also, investors who own the MDU preferred may reinvest those preferred dividends to buy shares of common stock. There are no purchase fees. Selling fees are $10 plus $0.10 per share. The plan administrator is Wells Fargo. For enrollment information call (877) 536-3553 or visit www.wellsfargo.com."

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