4 Utility Stocks With Dividend Yields Over 4%

by Susan J. Aluise | November 18, 2011 11:11 am

4 Utility Stocks With Dividend Yields Over 4%

In today’s volatile market, you’ve got to endure a lot of risk if you want to get a decent return, right?

Not necessarily: The utility sector has several stocks with dividend yields over 4% that have the potential of outperforming the broader market and generating serious returns over the long term.

So, if you’re looking for income and healthy dividends — and are still skittish about the real estate market[1] — investing in the utility sector might be for you. Unlike the eye-popping (but unsustainable) dividends in volatile sectors like dry bulk shipping, the right utilities can deliver high yields with lower risk.

Utilities also have a stable source of cash from ratepayers because, feast or famine, business and residential customers will always need electricity[2], water or gas. That makes the right stocks in the sector good long-term income plays.

These four utility stocks, though already richly valued, boast dividend yields of more than 4% and are worth checking out:

 PEPCO Holdings (NYSE:POM[3]). The often-criticized electricity and natural gas provider in Washington, D.C., Maryland, Delaware and New Jersey has a current dividend yield of 5.3%. At $19.16, POM is trading 15% above its 52-week low of $16.57 in August. With a market cap of $4.3 billion, the stock has a price-to-earnings growth (PEG) ratio of nearly 3.4 (PEG ratios higher than 1 are considered overvalued).  Its one-year return is nearly 9%.

Duke Energy (NYSE:DUK[4]). The company, which operates natural gas and electric supply, delivery and trading businesses in the U.S. and Latin America, has a current dividend yield of 4.9%. At $20.14, DUK set a new 52-week high of $21.02 last week. With a market cap of $26.8 billion, the stock has a PEG ratio of 3. Its one-year return is more than 20%.

Progress Energy (NYSE:PGN[5]). Progress, which is an integrated electric utility serving electric and gas customers in the Carolinas and in Florida, has a current dividend yield of 4.7%. At $52.34, PGN hit a new 52-week high of $53.82 last week.  With a market cap of $15.4 billion, the stock has a PEG ratio of 3.3. Its one-year return is 25.5%.

American Electric Power (NYSE:AEP[6]). AEP, which serves electric utility customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia, has a current dividend yield of 4.8%. At $38.33, the stock is trading nearly 16% above its 52-week low of $33.09 in August. With a market cap of $18.5 billion, AEP has a PEG ratio of nearly 3. Its one-year return is nearly 13%.

As of this writing, Susan J. Aluise did not hold an interest in any of the stocks named here.

Endnotes:
  1. real estate market: http://investorplace.com/2011/11/time-to-move-into-multifamily-housing-investments/
  2. customers will always need electricity: http://investorplace.com/2011/11/europe-us-stocks-discounters-energy/
  3. POM: http://studio-5.financialcontent.com/investplace/quote?Symbol=POM
  4. DUK: http://studio-5.financialcontent.com/investplace/quote?Symbol=DUK
  5. PGN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PGN
  6. AEP: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEP

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