Surprise! Electric Utilities Lead The Market

By | March 18, 2016

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It may be a sign of the strange times in which we live, but utilities that provide us with electricity have emerged as a leading industry group. This traditionally boring group is ranked No. 9 out of 197. It’s likely that low interest rates are forcing income investors to seek dividend-paying stocks. Also, growth stocks remain out of favor, and money managers might be seeking the relative safety of utilities. Some of the stocks in this group have broken out of bases, but chart readers aren’t usually drawn to them for an intermediate move. Investors who buy them usually do so because they expect them to generate income for a number of years. Also, if the current rally strengthens, money managers are likely to cast them aside in favor of growth stocks. A dozen stocks in the 38-member group have Composite Ratings of 90 or above. The No. 1 stock in the group is ITC Holdings ( ITC ) with a Composite Rating of 97.  It owns transmission systems that carry electricity to customers in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. Last month, the company announced that it is merging with Canada-based Fortis, which operates electric and gas utilities, in a deal valued at $11.3 billion. The company said the merger is accretive to earnings and that shareholders will see a meaningful dividend increase, which now equals an annualized yield of 1.8%. As part of the deal, Fortis will apply to list its shares on the NYSE. ITC’s stock has meandered out of a cup-with-handle base and is barely within the 5% buy zone from a 40.84 buy point. Pinnacle West ( PNW ) is the No. 2 company in the group with a Composite Rating of 96. It’s a holding company for Arizona Public Service, which supplies electricity to 1.2 million customers in Arizona and co-owns the Palo Verde Nuclear Generating  Station, the largest nuclear plant in the U.S. and a primary source of electricity in the southwest. The company is benefiting from Arizona’s population and economic growth. It recently raised its dividend for the fifth straight year. It’s the equivalent of an annualized yield of 3.4%. Pinnacle meandered out of a saucer-with-handle base with a 70.10 buy point and is still within the buy zone. Atlanta-based Southern Co . ( SO ) has a Composite Rating of 96. It generates and distributes electricity to 4.4 million customers in Alabama, Mississippi, Florida and Georgia with a generating capacity of 46,000 megawatts. It also has just emerged from a saucer-and-handle base and is only 1% above a 50.34 buy point. But volume was missing on the breakout. The annualized dividend yield is 4.3%. The five-year annualized earnings growth rate is 4%. Analysts expect a 2% EPS decline this year and a 5% increase in 2017. Image provided by Shutterstock .   Scalper1 News

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