Four Favorites for Utility Investors

11/02/2016 7:00 am EST


Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

As a result of the recent pullback in utility stocks, several of our favorite utility stocks now trade below our buy targets, observes Roger Conrad, editor of Conrad's Utility Investor.

Shares of Aqua America (WTR) have given up about 20 percent of their value from their all-time high and once again trade at a reasonable valuation.

Investors who participate in the company’s dividend reinvestment plan have the opportunity to make additional purchases. Aqua America rates a buy up to $30 per share for conservative investors.

Pattern Energy Group (PEGI) recently slipped below our buy target of $22 per share, giving investors an opportunity to lock in a 7.4 percent yield and profit from future dividend growth.

This high-quality yieldco has just joined our Aggressive Income Portfolio and is rated a buy up to $22 per share.

Dominion Resources (D) closed its acquisition of Questar Corp on Sept. 19, adding gas pipelines and regulated distribution assets in the Rockies — a new growth platform for the Virginia-based company.

The stock’s recent weakness is in line with the pullback in the sector, but also likely reflects concerns about the start date for the Atlantic Coast Pipeline being pushed back to early 2019.

But the company continues to profit from supportive regulators, a growing rate base and growth opportunities that take advantage of increasing demand for natural gas and renewable energy. Dominion Resources rates a buy up to $75 per share.

Conservative portfolio holding Duke Energy Corp. (DUK) closed its acquisition of Piedmont Natural Gas on Oct. 4, a transaction that adds a regulated gas utility in the Carolinas.
Management plans to follow up the deal by expanding its exposure to interstate gas pipelines.

Duke Energy should be on track to accelerate its annual dividend growth from the mid-single digits over the next two to three years.

Further downside in the utility sector could send the stock lower, but Duke Energy once again trades below our buy target of $77 per share.

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By Roger Conrad, Editor of Conrad's Utility Investor

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