1. American Electric Power: The Electric Company
American Electric Power Co. Inc. (NYSE: AEP) is roughly the sixth largest electric utility stock by market cap, at about $31 billion. It remains held back a bit by coal-fired plants and regulatory issues, but AEP has managed to deliver on earnings and dividend growth year in and year out. It is well run and takes pride in protecting shareholders.
With banks paying nothing on interest now, utility stocks have become this decade’s equivalent of a certificate of deposit. They are also outflanking the Treasury note market for investors seeking yield, but AEP and other utilities are valued much more in a low-rate environment compared to 2010. AEP yields 3.5%, versus about 5% back in late 2010. It serves about 5.4 million customers spread over 11 states.
Shares of American Electric were recently trading at $64.50, with a consensus analyst price target of $67.53 and a 52-week trading range of $52.29 to $67.19. Also worth consideration on AEP:
- Analysts were mixed on regulatory news.
- Deutsche Bank has it as one of four top utility picks.
- Merrill Lynch raised AEP and other targets.
Alternative Pick: Duke Energy Corp. (NYSE: DUK) seems to have its woes from years past in the rear-view mirror now, and its $54 billion market cap should speak for itself. Duke yields about 4.2% and is the largest utility in America in dollar terms, serving roughly 7.5 million retail electric customers.
2. American Water Works: Best Water Utility of Them All
American Water Works Co. Inc. (NYSE: AWK) shares have risen and risen, and sadly there is just not a similar alternative pick. This is the biggest water utility company in America, with over 15 million customers located in 47 states. Unlike regular utilities, it is impossible to deregulate water. With water being a secular investment theme, there is just one thing to ask here: what’s not to like? Just watch out for chasing valuations too high.
Shares of American Water Works recently traded at $73.93. The stock has a consensus price target of $69.08 and a 52-week range of $48.36 to $74.85. Also worth consideration for American Water Works:
- Is American Water’s premium too high for its safe dividend?
- Nine great companies that can hike dividends for a decade.
3. Cisco Systems: The Only Tech Stock
Cisco Systems Inc. (NASDAQ: CSCO) is one of the great stocks for the decade that actually has lagged the broader market since 2010. It has increased its dividend handily to the highest Dow tech dividend yield. If one company dominates the networking and communications market unlike any other company it is Cisco. Even under a new chief executive officer, Cisco is spending billions buying back stock and is considered a more nimble operation than when it was selected in 2010.
Cisco shares recently traded at $26.86, with a consensus price target of $29.62 and a 52-week range of $22.46 to $29.90. Also of interest on Cisco: