ITC Holdings Corp. (NYSE:ITC) unveiled the company's new five-year capital plan at a recent analyst meeting, and highlighted the advantages of its business model to investors.
These advantages include stability of earnings due to the heavily regulated businesses of the company and the growth expected from investments needed to maintain and improve transmission networks in the United States.

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ITC is an independent electricity transmission company with operations mostly in the Midwestern United States. All of the company's operations are fully regulated by the Federal Energy Regulatory Commission, which the company argues is a major advantage over being regulated by the individual states where it does business.

The heavily regulated nature of the business that ITC operates in has led to stability in earnings. ITC has grown earnings at a 21% compound annual growth rate since 2005, and expects to earn between $2.70 and $2.75 per share in 2010. In 2011, the company expects to earn between $3.20 and $3.30 per share.

The current return on equity allowed on the company's operations are as follows:

ITC Transmission13.88%
Michigan Electric Transmission Company13.38%
ITC Midwest12.36%
ITC Great Plains12.16%
Green Power Express12.38%

Capital Plan
Several studies by various agencies of the federal government suggest that major investments are needed in the United States transmission infrastructure to ensure long-term reliability.

ITC has established a five-year capital plan of $3.9 billion to be spent from 2011 to 2015. These funds will be spent on the company's current transmission system, generator interconnects and for development projects.

ITC estimates that the company will grow its rate base from an estimated $2.6 billion in 2010, to $4.9 billion in 2015, representing a CAGR of 14% over the next five years.

ITC pays a dividend of $1.34 per year, giving the stock a current yield of 2.2%.

The company's dividend policy is to keep its payout ratio between 40% and 50%, and keep the dividend yield at roughly the same rate as that of the S&P 500. ITC expects to grow the dividend 4% to 5% annually in the near term.

This yield falls below many other utilities, which typically provide higher dividends to attract investors. Duke Energy (NYSE:DUK), which is in the transmission business in the south and midwest has a yield of 5.5%, while Pepco Holdings (NYSE:POM) offers a yield of 5.8%. And one of the highest yields for a utility is Atlantic Power Corporation (TSE:C.ATP), which has a current yield of 7.7%.

Bottom Line
ITC Holdings Corp. unveiled an ambitious capital plan over the next five years to help power earnings growth and reinvigorate the U.S. transmission network. (For more, see Trust In Utilities.)

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Tickers in this Article: ITC, DUK, C.APT, POM

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