Vectren: Compounding Gains

04/11/2014 7:00 am EST


Vita Nelson

Founding Publisher and Editor, Moneypaper

Compounding never goes out of style; indeed, so far this year, stocks have sold off several times, only to bounce back to match or exceed all-time highs achieved at the end of 2013, observes Vita Nelson, editor of Direct Investing.

This is just the kind of action that leads many to wonder if the market is headed for a more substantial and prolonged decline. But there is also that nagging feeling that things could go the other way, and nobody wants to miss out on the next boom.

So investors become psychologically vulnerable if they don't follow a good system, such as dollar-cost averaging and dividend reinvestment. Those who stick with such a plan tend be able to weather any storm that sidetracks less logical traders and speculators.

Our strategy is to continue to invest on an ongoing basis through dividend reinvestment plans, such as those offered by our latest featured stock, Vectren (VVC).

The company was formed when Indiana Energy, which was founded in 1912, merged with SIGCORP in March 2000.

It operates in about two-thirds of Indiana, as well as west central Ohio, serving almost one million natural gas and 142,100 electricity customers, and logs about $2.5 billion in annual revenues.

Its Non-utility Group operates in three segments: Energy Marketing and Services, Coal Mining, and Energy Infrastructure Services.

Consensus estimates call for the company to earn about $2.23 per share this year, up from $2.12 in 2013, and to go on to net about $2.38 per share in 2015.

In October, the board of directors approved a boost in the quarterly dividend, from 35.5 to 36 cents per share, marking the 54th consecutive annual increase and providing a 3.8% yield.

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