From 62 To 5: Dividend Growth Utilities To Consider

Utility companies typically have a high dividend yield and make good dividend growth candidates because they operate in a regulatory environment which limits competition and keeps earnings relatively predictable. In this article, we'll go over all of the utilities in the US Dividend Champions list and apply a dividend growth screen to try and find high-quality companies for further consideration.
I used the following requirements:
Dividend Metrics: Used the April 30, 2018 version of the US Dividend Champions list to filter all utility stocks with a dividend streak of 10 or more years. This list is an invaluable resource for dividend growth investors, thank you David Fish. A reasonably high dividend yield of 2.85% or higher (Roughly 1.5 times the S&P 500 yield). Estimated future dividend growth of 6% or more. I used ValueLine's estimated annual dividend growth rates for the next 3-5 years for my estimates. A reasonable payout ratio of 70% or less based on the next 12 months EPS estimates (Dividend / N12 EPS). Quality Metrics: ValueLine financial strength of B+ or better. S&P credit rating of BBB or higher. Moody's credit rating of Baa2 or higher. MorningStar moat rating of narrow or wide. The Results So out of the 62 utility stocks in the US Dividend Champions list, only five passed my dividend and quality metrics screen. (FYI - The full table is at the end of this article).
Alliant Energy Corp. (LNT) CMS Energy Corp. (CMS) Edison International (EIX)... Read more