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SCANA: Safe and Reliable
01/05/2016 7:00 am EST
Investors are dazzled by the sound and fury of the stock market. Months (if not years) of speculation about rising interest rates, the carnage in oil, and continuing incidents of terrorism can certainly leave anyone confused, fearful, and uncertain, cautions David Fish, editor of MoneyPaper.
These are the times an investor needs to be levelheaded and take a step back to focus on what they know to be most important.
What most of us intuitively know is that there are plenty of investments that make up the core of our portfolios specifically because they are steady, reliable, proven, and recognizable.
These are the type of investments that we should focus on during turbulent times. We know that there will always be the need for food, medicine, electricity, fuel, and other basic necessities.
Companies serving these needs have shown their worth over decades and are not subject to fads or fashion.
For example, SCANA (SCG)—founded in 1924—supplies electricity to 688,000 customers and provides natural gas to 859,000 residential, commercial, and industrial customers in North Carolina and South Carolina, as well as 450,000 customers in Georgia.
It also provides natural gas, offers energy-related risk management services, owns two liquefied natural gas plants, and provides tower site construction, management, and rental services in South and North Carolina.
Consensus estimates call for the company to have earned about $3.82 per share in 2015 and $3.94 in 2016, compared with $3.79 in 2014.
SCANA has increased its dividend for 15 consecutive years and its $2.18-per-share annual payout provides a yield of 3.8%.
What makes SCANA attractive is its position as a solid, reliable utility serving the growing populace of large area of the Southeastern United States and its growing dividend that is well covered by earnings.
The payout ratio is just 57% of 2015 earnings and continuing dividend increases mean that the current yield will keep growing over time, compared with the current price.
And a strategy of dollar-cost averaging should be handsomely rewarded by the above-average yield compounding over time, driven by reinvestment and continued growth in the customer and earnings base.
SCANA has all the hallmarks of a relatively safe, reliable holding that can be built from a single share to a large, solid holding for retirement.
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