Have Utilities Become Grossly Oversold?
Utilities have been a staple piece of a portfolio for many years. In some ways, these power-generation companies and electric utilities have replaced traditional certificates of deposit and other income-generating investments. This year has started out with a very different tone among utility investors. What is clear is that institutions and retail investors alike have been exiting the sector for a solid part of the 2015 year in order to be out ahead of the coming Federal Reserve interest rate hikes.
24/7 Wall St. wanted to take a look at the utility sector’s performance to see if these stocks were becoming grossly oversold, or if the valuation was becoming fair now. Of the utilities chosen, these were all valued at more than $10 billion, and they were all down more than 10% year to date. Also included was the ever-important dividend yield and dividend trend, as well as additional color on what other firms are saying or what the news flow may be pointing to.
Duke Energy Corp. (NYSE: DUK) was just recently raised to an Outperform rating with a price target at $86 at Bernstein. 24/7 Wall St. also has Duke listed as an alternative pick as one of the top stocks to own for the next decade. So far year to date, Duke shares have dropped about 12% and are currently 20% off the 52-week high. Shares of Duke closed Wednesday down 0.1% to $72.05. The stock has a consensus analyst price target of $81.75 and a 52-week trading range of $68.81 to $89.97. The company pays an annual dividend of $3.18, which is a dividend yield of 4.2%.
Dominion Resources Inc. (NYSE: D) posted an earnings beat for its first quarter, along with an 8% increase in its dividend, but it has still seen its shares slump. At the same time, the company plans to invest $20 billion in the next six years in its Mid-Atlantic region. Year to date, the stock has dropped 11.5%, and shares are currently 17.4% off the 52-week high. Dominion shares closed Wednesday relatively flat at $66.85. The 52-week trading range is $64.71 to $80.89, and the stock has a consensus price target of $79.44. The company pays an annual dividend of $2.59, for a dividend yield of 3.7%.
PPL Corp. (NYSE: PPL), at the beginning of 2015, was considered a preferred utility stock to buy at Merrill Lynch. The company is among the leading utility companies in the United States that plan to continue to increase regulated operations and lower earnings volatility attached to competitive operations. However things have not necessarily gone according to plan. Year to date, PPL stock has dropped nearly 15%, and shares are currently 20.8% off the 52-week high. Shares closed Wednesday up 0.4% at $30.22, in a 52-week range of $30.06 to $38.14. The stock has a consensus analyst price target of $35.34. The annual dividend of $1.49 offers a dividend yield of 4.7%.
Eversource Energy (NYSE: ES) is considered by UBS to be a top utility stock in its Dividend Ruler portfolio. When the company reported its first-quarter earnings, it beat Wall Street estimates and surpassed its previous year’s earnings. Yet the stock has continued to struggle. Shares have dropped 12.3% year to date and are currently 18.7% off its 52-week high. Eversource shares closed Wednesday down 0.3% at $46.18. The consensus price target is $53.13. The 52-week trading range is $41.92 to $56.83. The company pays an annual dividend of $1.67, a dividend yield of 3.4%.
Entergy Corp. (NYSE: ETR) led regulated utilities in the first quarter, along with Duke, for the fewest outage days. Its nuclear power plant in Massachusetts just returned to full service this week as well. So far year to date, Entergy shares have dropped around 17.5%, and are currently 23.2% off its 52-week high. Shares of Entergy closed Wednesday down 0.3% at $70.71. The consensus price target is $81.73, and the 52-week trading range is $70.64 to $92.02. The company pays an annual dividend of $3.32, for a dividend yield of 4.3%.