Thursday, January 24, 2013 3:03:06 PM
There are multiple variables, of course. A falling participation rate—which ironically enough would typically be prompted by a worsening economy—could bring unemployment to 6.5% sooner, assuming poorer conditions did not simultaneously crush job creation. Conversely, a rise in the participation rate back to the 2012 level of 64.2% would turn that 6.5 year timeline into 16 years if there were no corresponding improvement in job creation. The Fed’s own figures show unemployment falling by 0.22% annually if GDP growth is in the 2.25% to 2.75% range, which also puts 6.5% between five and six years away.
A predictable interest rate environment has many implications, but we’re going to examine what it means for a very capital-intensive industry: utilities. Aside from the direct benefit of low rates for financing equipment upgrades and expansion, with paltry rates on most fixed income investments a solid, dividend-paying sector like utilities becomes more attractive.
One candidate is Chesapeake Utilities Corp. (NYSE:CPK), not to be confused with the much larger Chesapeake Energy (NYSE:CHK). Chesapeake Utilities is engaged in natural gas and some electric distribution up and down the Eastern Seaboard from Delaware to Florida, and also operates natural gas pipelines in the Northeast. With low long-term natural gas prices, the lion’s share of new electrical generation is based on natural gas, and there is an opportunity to replace higher-priced home heating options like heating oil with cheaper and more environmentally friendly gas.
Chesapeake is now at a P/E of 17.1, slightly below the 18.5 of its peer group. What is striking is that its long-term debt to equity is 0.4 compared to 0.8 for its peer group and 1.1 for the industry. This means the company has the elbow room to accomplish infrastructure upgrades or expansion with inexpensive capital.
At this point the stock is only 2.15% off its 52-week high, its last close at 47.87, and for most of the first half of 2012 it traded in a range between 40 and 43. Consequently, it will need to come down slightly to be a bargain. Chesapeake is paying a 0.365 quarterly dividend.
Water is an increasingly contested resource in many parts of the world and even the U.S., particularly the West. One company providing water to what are essentially captive markets is Consolidated Water Co., Ltd. (NASDAQ:CWCO). Consolidated operates in Belize, the Bahamas, the Caymans, and the British Virgin Islands, providing retail and commercial water supplies with seawater desalinization plants. Thomson Reuters upgraded the stock on January 11, but it is still at a 4 out of 10 (the low end of neutral); Second Opinion upgraded Consolidated to Long on January 14.
At this point the stock is only 6.06% off its 52-week high but 27.31% off its 52-week low, so based on price performance over the trailing twelve months, it seems likely that Consolidated will head lower soon, at which point it will become a better buy. Its P/E of 19.2 is slightly below the industry average of 20.8, but more significantly, like Chesapeake Consolidated has minimal debt at this time. Total debt to equity is only 0.1 versus 3.3 for its peers, which means it is well-positioned to take advantage of low capital market rates.
Utilities in general have suffered from the weak housing market, but for companies like these that have low long-term debt ratios the current low-cost capital market offers an opportunity. Should either of them decide to leverage this opportunity, such a move would make them even more attractive.
See the full story and more here... http://emerginggrowth.com/investing_today/years-of-low-interest-rates-ahead-check-out-dividend-paying-utilities/01/24/2013
Recent MS News
- Morgan Stanley Private Credit Leads Strategic Growth Capital Investment In Guardian Dentistry Partners • Business Wire • 05/06/2024 01:00:00 PM
- Alphabet CEO’s Billion-Dollar Wealth, Microsoft’s $1.7B Indonesia Investment, and More News • IH Market News • 04/30/2024 11:58:40 AM
- BHP Bids $38.8 Billion for Anglo American; Biden Unveils Historic Micron Technology Deal, and More News • IH Market News • 04/25/2024 11:48:40 AM
- Morgan Stanley Names 10 Women and an Ally as their MAKERS Class of 2024 • Business Wire • 04/24/2024 02:00:00 PM
- Graystone Consulting Named a Quality Leader for Third Straight Year by Coalition Greenwich • Business Wire • 04/23/2024 02:00:00 PM
- Resilient Waters Fund Wins the 2024 Kellogg-Morgan Stanley Sustainable Investing Challenge • Business Wire • 04/22/2024 09:03:00 PM
- Morgan Stanley Wealth Management Pulse Survey Reveals Bullish Sentiment Despite Drop in Optimism • Business Wire • 04/18/2024 08:05:00 PM
- Apple to Invest $250 Million in Singapore Expansion, Oracle Commits $8 Billion to Japan Infrastructure, and More News • IH Market News • 04/18/2024 11:11:52 AM
- United Shares Surge 5.3% in Q1 2024 Earnings Beat; Take-Two Cuts 5% of Workforce, and More News • IH Market News • 04/17/2024 10:57:39 AM
- Morgan Stanley’s Q1 revenue up 4% to $15.1B • IH Market News • 04/16/2024 01:49:32 PM
- Dow Looks To Snap Six-Day Losing Streak As UnitedHealth Surges • IH Market News • 04/16/2024 01:09:47 PM
- Morgan Stanley First Quarter 2024 Earnings Results • Business Wire • 04/16/2024 11:30:00 AM
- U.S. Index Futures Signal Mixed Trading, Oil Prices Dip • IH Market News • 04/16/2024 11:19:33 AM
- U.S. Stocks Extend Sell-Off As Treasury Yields Surge After Retail Sales Data • IH Market News • 04/15/2024 08:38:32 PM
- Paramount Global Board Shrinks, Morgan Stanley Faces Regulatory Probe, and More News • IH Market News • 04/12/2024 11:05:29 AM
- Morgan Stanley Strengthens Alliance for Children’s Mental Health with New Funding and Members • Business Wire • 04/11/2024 01:00:00 PM
- Tesla Resolves Autopilot Lawsuit, JPMorgan Unveils Potential CEO Successors, and More • IH Market News • 04/09/2024 10:39:30 AM
- Morgan Stanley Direct Lending Fund Announces First Quarter 2024 Earnings Release and Conference Call • Business Wire • 04/08/2024 08:05:00 PM
- Crypto: Morgan Stanley and UBS Compete for Leadership in Bitcoin ETFs, Risks in Ethena’s USDe Strategy, and More • IH Market News • 04/05/2024 06:15:55 PM
- Apple Terminates 614 Employees, Disney Unveils June Crackdown on Password Sharing, and More Updates • IH Market News • 04/05/2024 11:38:57 AM
- Kerrick Henderson at The Michalzuk Group at Morgan Stanley Receives CHARTERED FINANCIAL ANALYST® Designation • Business Wire • 04/03/2024 02:00:00 PM
- Morgan Stanley Capital Partners Acquires Resource Innovations • Business Wire • 04/02/2024 01:00:00 PM
- Morgan Stanley Infrastructure Partners Announces Investment in The Pasha Group • Business Wire • 04/01/2024 12:00:00 PM
- Morgan Stanley Wins Three 2024 Technology Awards in Generative AI, Fractional Shares, and Portfolio Risk Management • Business Wire • 03/27/2024 02:30:00 PM
- GameStop Shares Tumble 20% in Pre-Market Trading Amid Revenue Decline, Direct Digital Plummets 42%, and More News • IH Market News • 03/27/2024 10:54:47 AM
NanoViricides Reports that the Phase I NV-387 Clinical Trial is Completed Successfully and Data Lock is Expected Soon • NNVC • May 2, 2024 10:07 AM
ILUS Files Form 10-K and Provides Shareholder Update • ILUS • May 2, 2024 8:52 AM
Avant Technologies Names New CEO Following Acquisition of Healthcare Technology and Data Integration Firm • AVAI • May 2, 2024 8:00 AM
Bantec Engaged in a Letter of Intent to Acquire a Small New Jersey Based Manufacturing Company • BANT • May 1, 2024 10:00 AM
Cannabix Technologies to Deliver Breath Logix Alcohol Screening Device to Australia • BLO • Apr 30, 2024 8:53 AM
Hydromer, Inc. Reports Preliminary Unaudited Financial Results for First Quarter 2024 • HYDI • Apr 29, 2024 9:10 AM