Image Source: Eric Golub
Alliant Energy
Alliant Energy (LNT) is a utility holding company, providing regulated electricity and natural gas services to residential, commercial, industrial, and wholesale customers in the Midwest of the US, particularly Wisconsin and Iowa. Moving forward, the firm will continue to grow its exposure to natural gas and wind and other renewables, while reducing its dependence on coal and oil. Despite its regulated operations and competitive dividend yield, we think there are better income ideas for investors looking for exposure to utilities due in part to growth in its debt load in recent quarters. However, management continues to target a dividend payout ratio of 60%-70% of consolidated earnings. Shares appear fairly valued at the moment..
First Majestic Silver
First Majestic Silver (AG) is a silver producing firm with all of its silver production coming from the six mines it owns and operated in Mexico, the world’s largest silver producing country. The company expects solid production growth over the next 3-5 years thanks to two major projects beginning operations in the coming years. By the end of this growth period, the firm expects to produce approximately 20 million ounces of silver annually. Since First Majestic is so heavily exposed to silver (~70% of total revenue is generated from silver production) its operations are quite susceptible to the price of the precious metal. The company is also exposed to material geographical and political risk as all of its silver production takes place in Mexico. Shares appear fairly valued at the moment.
Xcel Energy
Xcel Energy (XEL) prides itself on being a proactive environmental leader among utilities. The company has been named the top utility wind energy provider in the US for 12 consecutive years by the American Wind Energy Association, and it continues to work to improve its fuel mix, significantly reducing its dependence on coal while growing its wind and solar exposure. Though the utility has a competitive annual dividend yield, it was forced to cut its dividend in 2002. We’re not particularly enthused by the safety of the payout, but management is targeting annual dividend growth in a range of 5%-7% and a payout ratio between 60% and 70%. Shares aren’t attractive to us at this point in time, based on our fair value range.
Please access each firm’s 16-page report for more information.