These Three Companies Keep Powering On!

Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Powering the Super Bowl turned out to be quite the momentous task. Those who were watching the game found out that a little outage could cause a 30-minute delay in the game. Can you just imagine how much power the Superdome was using at that time? How about the millions of homes around the nation with their TV sets on or the countless fridges that were working overtime to keep the beer cold? All of this adds up to a whole lot of power that the utility companies of the nation make a ton of cash from.

Who Was Powering the Super Bowl?

The company powering the Super Bowl at the time of outage was Entergy Corporation (NYSE: ETR). Entergy operates a utility division that sells power in Arkansas, Mississippi, Texas, and parts of Louisiana, including the city of New Orleans.  While investigations are underway as to the actual cause of the outage, we can’t put fault on Entergy, a company that actually looks like a good investment at first glance.

Entergy is an $11.5 billion company that gives investors a dividend yield of 5.1%, which is nothing to scoff at. The P/E ratio isn’t too high either, sitting at 16.3.  The growth paints a pretty bad picture of Entergy, but it’s not something that I’m worried about. Revenue growth over the last five years has been -1.99%, and EPS growth over the same time period has been running at -1.42%. Analysts see further drops along the horizon, but I think that dividend is more than enough to keep investors around, and if those further drops are guaranteed then they’re more than likely already priced into the stock.

While Entergy may be losing slightly on EPS, they have an above average five-year ROI at 6.5%, while the industry as a whole has an ROI of 3.8%. The company is also attractively priced when looking at metrics such as price to sales, price to book, and price to tangible book, where they are priced 1.11, 1.25, and 1.31 times, respectively.

The Competitors

Entergy is one of many electric utility companies operating in the United States. In terms of size, it sits right in the middle with its $11.5 billion market cap. Sitting nearer to the top of the electric providers pile is Duke Energy (NYSE: DUK) and NextEra Energy (NYSE: NEE).

Duke Energy comes into this battle with a $48 billion market cap and more than four million customers located in five states. The majority of Duke’s market cap comes from their power generation arm, which is in operation throughout the United States and Latin America.

Will Duke stand the test of time and present an interesting investment? Let’s take a look at the metrics. A quick look at earnings shows some incredibly stable EPS numbers that show some signs of small growth over the coming years. The five year EPS growth is -0.1%, but the three year is considerably better at 11.5%. Revenues over those same three years have grown a nice 8.55%.

With the steady growth and the overall stability of Duke we see higher price ratios. The P/E ratio at Duke is 21.6 and price to tangible book is sitting at 1.98. The dividend is at 4.45%, though, which could be enough for me to add this company to my portfolio.

NextEra Energy, like Duke, has around 4 million customers on their books. NextEra’s customers are spread across the United States and are located in three of Canada’s provinces.  In terms of EPS growth the $30.5 billion NextEra looks better than both Entergy and Duke. Five year EPS growth is at 6.49%, but revenues over that same time period have been sinking at a rate of -1.6%. NextEra is expected to grow earnings over the next two years, another plus for the company.

The pricing metrics at NextEra are lower than those at Duke. NextEra’s P/E ratio is at 15.8, below the industry average 17.1, and the company is also trading at 1.92 times tangible book. A 3.3% dividend yield is offered by NextEra, and that dividend has been growing year-over-year.

Bottom Line

I like all three companies for a long-term hold. All three provide an immense level of stability and all three pay an exceptional dividend.

If you are looking for a good dividend you’d be better off buying Entergy over Duke and NextEra--but for overall stability, dividend, and potential I would go with Duke.

Duke is the biggest of the three companies, it pays a massive dividend, and the EPS numbers are incredibly stable. The P/E may be too much for some to handle, but if it doesn’t scare you away, I say go for it!


Ash1402 has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus