Alliant: Safest of the Safe?
02/18/2016 8:00 am EST
In an increasingly uncertain world, income investors want to know which utility stocks are safest, especially given the ill portent of the market’s recent tumult, suggests Richard Stavros, editor of Utility Forecaster.
We have long focused on the utility sector’s credit quality as part of our effort to evaluate the safety and sustainability of dividends.
Our proprietary Safety Rating System scores each stock in our universe according to eight fundamental criteria.
In looking at the safest utilities, we look at those utilities that scored the highest in our proprietary Safety Rating System. We then review debt to0 equity, short-term liquidity measures, and free cash flow, among myriad data points.
Among the utilities in our portfolio, we continue to be impressed with Alliant Energy’s (LNT) conservative financial approach.
In applying our enhanced credit screen, Alliant was one of a select few firms to achieve top marks on a number of different metrics.
Alliant’s current ratio is above 1, which is a sign of excellent financial health. This tells us how a company might fare during a sudden liquidity crisis.
Alliant also has a debt to equity ratio around 100%, which is actually quite low compared to the industry average of 134%.
Funds from Operations (FFO) is also useful when analyzing operating earnings from companies such as utilities that have sizable non-cash expenses.
Among its peers, Alliant has one of the highest FFO-to-debt ratios, which means it is in a good position to pay down debt with operating income.
With a forward yield of 3.5%, Alliant is a buy below $64 for conservative income investors.
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