3 Utilities With A Decade's Double-Digit EPS Growth

By Aryeh Katz | June 21, 2010 AAA



Here's a test for you: Try to find a trio of stocks that pay a dividend as good as or better than a 10-year treasury. Make sure they also trade with P/Es under 15 and post a 10-year EPS growth rate of 10% or better.

If that's too tall a task, below we've provided you a crib sheet. Here are three stocks that meet the above criteria and then some - all of which, incidentally, hail from the utilities sector. (To learn more, see Trust In Utilities.)

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Northern California EPS Dynamo
PG&E Corporation
(NYSE:PCG) is in the electricity and natural gas distribution business. The company services more then 5 million electricity and 4 million gas customers in Northern and Central California. Remarkably, PG&E has grown earnings per share at an extraordinary 56% rate over the last decade.

The company offers a current dividend yield of 4.23% and trades with a price/earnings ratio of 13.5. Also attractive are its price to book and price to sales ratios, which come in at 1.54 and 1.19 respectively. Its market cap is $16 billion.

In the last year PCG stock has risen over 14%, outperforming the sector, as represented by the Utilities SPDR ETF (NYSE:XLU), which tacked on only 8.7% in that time frame. PG&E shares are also up better than 66% over the last decade, far better than the broad market, represented by the SPDR S&P 500 ETF (NYSE:SPY), which is down over 24% in 10 years.

Better Dividends
Avista Corporation (NYSE:AVA) offers investors a better dividend yield and lower P/E than PG&E, but can't touch its long term EPS growth. AVA pays 4.91% annually and trades with a multiple of 13.2-times last year's earnings. For the decade just passed, Avista has grown earnings per share at a 23.6% clip - nothing at all to be ashamed of.

Avista is headquartered in Spokane, Washington and also operates in the electricity and gas distribution business.

Price to book is an impressive 1.05, while price to sales only 0.75.

The best dividend and P/E readings for the group, however, belong to Exelon Corporation (NYSE:EXC), which offers electricity and gas service to communities in and around the Greater Philadelphia area. Exelon's current yield is 5.15%, and her P/E is 9.8. In the past decade, EXC has grown EPS numbers at a 10.25% rate.

The Bottom Line
EPS growth can be tied directly to a strong management team, something each of the above three companies possess. Couple with solid dividends and reasonable earnings multiples, and these issues have very little that doesn't commend them for purchase.

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