If there is one thing every
investor can appreciate, it is a growing stream of reliable dividends. With the
Federal Reserve aiming to raise rates in December, the rate sensitive stocks
have seen some price declines.
One of those rate
sensitive sectors is the utility sector. To help investors find some of the
best companies in the sector, I began researching those utility stocks with at
least 5 straight years of dividend increases. 54 companies are part of the
results. That's a huge number which I want to reduce by implementing higher
restrictions. More about this method can be read below.
Some investors
like to build their dividend growth portfolio with very different strategies.
One trick that I have found can help investors stay on track is to mentally
consider the costs they will need to pay each month of their life and to set a
goal for covering those costs with dividend income.
There is a
beautiful irony in being able to cover the costs an investor faces in their
life with a dividend check from the same company that is selling them a
product. When it comes to the utility companies, it makes sense to have a more
diversified portfolio rather than simply owning the utility that covers the
investor's primary residence.
The simple
geographic risk of a natural disaster impacting the company and the investor's
life at the same time makes it ideal to use a portfolio with at least a few
different utility companies, even when the investor wants to use a utility
dividend check to pay for their cost.
Utilities are mostly not diversified but you can do it on your own by investing smaller amounts into several sub-industries.
I've created two charts from my dividend growth utility database. The first table lists all utilities with a debt-to-equity ratio below one. I think its also important to have a look at financial ratios, especially when rates go up in the near future.
The second chart
gives an overview of dividend growth utilities with a predicted 5% earnings growth
for the next five years. It's a more bullish view on future earnings.
Here are the
results…
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| Dividend Growth Utilities With A Debt-To-Equity Below One (click to enlarge) |
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| Dividend Growth Utilities With A 5 Year Earnings Growth Outlook Over 5% (click to enlarge) |