PPL: An All-Weather Utility Pick

10/11/2018 5:00 am EST

Focus: UTILITIES

Jim Powell

Principal Analyst, Global Changes & Opportunities

I’ve been down Wall Street’s yellow brick road several times during my 45-year career and I know that a day of reckoning is coming, cautions Jim Powell, editor of the industry-leading Global Changes & Opportunities Report.

When it hits, all the negatives that investors chose to overlook on the way up will add to the severity of the decline. Although I don’t think the downturn will happen for a year or so, I could be mistaken. A seemingly unimportant event can upset what appeared to be a stable system.

When investors become nervous about a downturn – but they don’t wish to sell out and miss what is more likely to be more growth — choosing stocks that resist economic and market swings is an excellent strategy.

All-weather stocks that also pay attractive dividends are particularly desirable. If the stocks happen to sell at discounts, all the better.

PPL Corporation (PPL) fits the bill for what many investors should choose for the current stock market and economic uncertainties. PPL is an electric utility holding company with operations in the Northeastern US and the UK.

The utility is in a secure industry with growing profits. Currently the company pays an attractive 5.78% dividend, vs. only 3.24% for its industry, and an anemic 1.8% for the S&P 500. That’s a lot to like.

PPL looks particularly good right now. The stock price is down primarily because the Fed's interest rate hikes make dividends look less attractive.

However, PPL’s yield is nearly twice what Uncle Sam pays on his 10-year Treasury bonds — and the stock also offers the prospect of attractive capital gains. I think PPL will be an excellent performer for investors.

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