The CAPS Stock Screener is one of my favorite tools, because adding the views of peers (CAPS Star Rating) can always be helpful. Today we're going to look at some 5 Star Utilities, and come up with a winning investment. Additional criteria on this preliminary screen included P/E (0-20), Dividend Yield (>3%), and Return on Equity (>10). Here are the 5 star competitors.
|Company||Market Cap||P/E||Div. Yield %||ROE|
|Cleco Corporation (NYSE:CNL)||$2.7B||15.5||3.1%||11.4|
|CPFL Energia S.A. (ADR) (NYSE:CPL)||$9.5B||12.4||6.6%||17.3|
|EL Paso Electric Company (NYSE:EE)||$1.3B||14.6||3.0%||11.0|
|PPL Corporation (NYSE:PPL)||$17.9B||11.7||4.7%||14.5|
|South Jersey Industries Inc (NYSE:SJI)||$1.7B||16.0||3.2%||14.8|
Investors flock to non-cyclical investments in unsure times, and that is definitely the case here, as all of the preceding stocks are within 5% of their 52-week high excluding CPFL. Fortunately there are still some opportunities here, so let's take a look to see if these stocks deserve their 5 star rating.
Cleco Corporation (NYSE:CNL) operates in two segments: Cleco Power, a regulated electric utility that serves approximately 279,000 customers in Louisiana, and Cleco Midstream, a competitive wholesale generation business. They definitely have a reliable dividend; it has been paid out to investors since 1935, and their payout ratio is currently 45. Last year Cleco gave their future a big boost by signing a 10-year contract to supply power to Dixie Electric Membership Corp. The contract takes effect in early 2014, and analysts have predicted annual earnings growth will increase from 2% to 6% in upcoming years. I definitely agree with the 5 star rating in this case.
CPFL Energy SA
CPFL is an electric utility in Brazil that is at the opposite side of the spectrum in comparison to our other 5 star stocks, sitting right next to its 52-week low. Earnings have not been great, as CPFL currently has a PEG of 4.00 and a payout ratio of 94.00--not pretty numbers. Earnings have been hurt recently as CPFL widens their business with multiple acquisitions, and only time will tell if these additions pay off. In a recent government auction with seven operating licenses up for grabs, CPFL only came away with one, building a substation in Sao Paulo. The auction winner is decided by who is willing to take the lowest annual revenue from operations. Though CPFL is at a beaten down price, I'm not sure they deserve 5 stars with their recent performance.