Dividend investors have looked to the utilities sector for companies that will reward their shareholders' faith with healthy dividend payouts. However, the sector, along with the overall S&P 500, suffered some dividend cutbacks in 2009 to stay above water and reinvest free cash to kick start returns during the recession. Now that the worst appears to be behind us and some analysts are calling this the beginning of the next great bull market, investors would be well-advised to look to the utilities sector for not only large dividends but capital growth as well.

IN PICTURES: JXI) up only 14% over the past 52-weeks and actually falling 6.2% so far in 2010. Compare that to the S&P 500 as a whole, which has rallied nearly 40% in the past year and started out this year with a solid 8.25% showing. With that being said, the sector could provide a solid buying opportunity for investors who implement a sector-rotation strategy. With utilities generally regarded as defensive stocks, their pronounced fall and consequent struggles through the recovery point to some possible value. Even if the sector as a whole continues to lag behind its flashier counterparts (namely technology and retail), the dividends alone will compensate investors for taking the chance.

Charged-Up Dividends
Below are a few utility stocks which could be primed for a run and offer shareholders a nice dividend as well.

Company Yield
Consolidated Edison (NYSE:ED) 5.2%
FirstEnergy (NYSE:FE) 5.8%
The Southern Company (NYSE:SO) 5.2%
Progress Energy (NYSE:PGN) 6.1%
Hawaiian Electric (NYSE:HE) 5.2%
Ameren Corporation (NYSE:AEE) 6%
Westar Energy (NYSE:WR) 5.2%
Wisconsin Energy (NYSE:WEC) 3%

Wisconsin Wiz
Of the companies listed above, one company that has been on a nice run is Wisconsin Energy. The Milwaukee-based utility and energy provider has seen its stock price rise 30% over the past year, lapping the broad sector and many of its peers. In fact, this past Thursday WEC's shares set a new all-time high of $52.24, primarily on the hope that the company will announce better-than-anticipated numbers during its Q1 earnings announcement on Tuesday May 4.

While analysts only expect the company to earn just over $1/share, less than the $1.20 earned in the same quarter last year, analysts are more excited about the growth potential. Neil Kalton of Wells Fargo Securities expects WEC profits to grow in the neighborhood of 9% per year for the next four years - quite a feat for any firm that generates substantial revenues from natural gas, especially in today's new nat-gas market. As well, Kalton predicts that Wisconsin Energy's dividend growth rate could be in the area of 12% annually over the same period, numbers that would dwarf those of similar sized utility companies.

Trading close to an all-time high, with a P/E above 16 and a current yield of only 3.05%, it's understandable that skeptics would shy away from WEC. However, I like the growth prospects too much to ignore this high-flier. Any sort of pull-back in the stock price could be a great buying opportunity and potential investors should really do their homework to make sure that WEC is suitable for their portfolio.

Bottom Line
These utility stocks all offer investors a healthy dividend yield to along with the possibility of some capital appreciation. The sector as a whole looks ready to begin making up the distance that the broader market has made up over the past 15 months. Rotational investors should seriously consider examining the fundamentals of the sector and the individual companies listed above to see if now is the right time to get back into utilities. (To learn more, see Trust In Utilities.)

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