PPL Corporation (PPL), National Grid plc (ADR) (NGG): Can This British Dividend Stock Bring You Royal Returns?

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British-American utility PPL Corporation (NYSE:PPL) reported earnings this week, beating on both top and bottom lines. With solid regulated earnings and a brighter forecast, investors are wondering whether it’s too late to get in on this dividend stock’s profits. Here’s what you need to know.

Number crunching
On the top line, PPL Corporation (NYSE:PPL) powered past analyst expectations. The utility pulled in $3.45 billion in sales, 35.4% higher than Q2 2012 and a whopping 31.2% above Mr. Market’s predictions.

Although revenue rocketed, the utility’s bottom line registered more modest growth. Adjusted EPS clocked in at $0.49, falling 3.9% from last year’s Q2. But with analyst expectations of $0.46 adjusted EPS, PPL Corporation (NYSE:PPL) beat on both lines.

For a peck of perspective, here’s how PPL Corporation (NYSE:PPL)’s trailing-12-month sales and adjusted EPS have fared over the last five years (essentially since the bottom of the Great Recession). While sales have headed up nearly 50%, earnings have tapered off around 18%.

PPL Revenue TTM Chart

PPL (NYSE:PPL) Revenue TTM data by YCharts

Focusing on fundamentals
In the words of PPL Corporation (NYSE:PPL) chairman, CEO, and president Bill Spence, “[W]e’re pleased with our year-to-date results and feel good about our ability to deliver strong results for the full year.” The company’s regulated earnings grew across the board, from Kentucky to Pennsylvania to the United Kingdom. The company’s British operations account for more than half of overall earnings, and PPL made positive progress with 7.6% EPS gains.

Another stock reporting progress from across the pond is National Grid plc (ADR) (NYSE:NGG). The Britain-based utility announced this week that it plans to increase its regulated assets by 6% per year over the next few years. Since utilities’ earnings are (roughly) regulated as a percentage of total sales, more regulated assets ideally translates directly to more earnings.

Utilities rocking regulation stand in stark contrast to Exelon Corporation (NYSE:EXC)‘s tough quarter. With 65% of its generation fleet reliant on PJM auctions for pricing, cheap power has pushed down the utility’s sales expectations. Although Exelon beat on sales and missed by just $0.01 on EPS this quarter, $750 million in new expected sales reductions over the next two years dropped share prices this week.

Probably the biggest news from PPL Corporation (NYSE:PPL)’s quarter hasn’t even happened yet. The utility is upping its ongoing operations earnings expectations for fiscal 2013. Previously in the range of $2.15-$2.40 per share, PPL is edging expectations upward to $2.25-$2.40.

Those predictions are further supported by a solid 7.9% compound annual growth base rate expectation for the next five years. Compared to NextEra Energy, Inc. (NYSE:NEE)‘s 5%-7% range through 2016, it seems Florida regulators might have more of a stiff upper lip than their British counterparts. And like PPL Corporation (NYSE:PPL), NextEra needs those rates to rise, with regulated earnings accounting for 63% of total earnings this quarter.

Looking ahead
With solid sales expectations, income investors shouldn’t be worried about a dividend dip. PPL Corporation (NYSE:PPL) share prices have edged down 3.8% over the last three months, putting the dividend stock’s current yield at 4.6%.

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