I don't allocate a percentage of the dividend portfolio to electric/gas utilities. I did want at least one gas (PNY) and I did want a nuclear (EXC), but for the most part, I prefer regulated and the more reliable revenues and dividends, but I'm not locked into them. I'm willing to be flexible.
I actually purchased my utilities by region. I wanted to spread them around the country. I broke it down to NE, Mid-Atlantic, South East, Mid-West, Southwest, and Northwest.
At the time of purchase each company I own was raising the dividend. I had a minimum yield requirement of 4%. At the time, the total return dividend ratio had to be 12% or better. What I mean by that is when you add the yield to the 5 year dividend growth rate (DGR), the number had to exceed 12%.
For example, D has a 4.0% yield and a 5 year DGR of 8.05% for a total of 12.05%. It qualifies for purchase as long as the fundamentals and valuations line up.
UNS has 4.0% yield and a 5 year DGR of 15.05% for a total of 20.05%. It too qualifies.
ED has a 4.0% yield and a 5 year DGR of 0.85% for a total of 4.85%. I won't own ED.
Since yields have come down considerably for utilities, I will accept an 8% total return ratio.
Although EXC froze the dividend after I purchased it, I thought they represented a special situation with their merger and I was willing to extend their probation period. They received the death sentence today. I sold them. Just the hint of a lower dividend was enough to take my loss and move on. I don't have the total number, but the loss was about 15%. EXC represented just a tad over 1% of my total portfolio value, so the loss was minimal. That will be made up with two weeks of dividends this month. ... Ha!
I haven't replaced it yet.
SCG is on probation. It has a 4.0% yield and a 5 year DGR of 2.52%, and dropping. I have a decent profit in SCG. I'll wait until I find a replacement before I sell them, provided I do indeed sell. They are due to announce their next increase in the next quarter, so I may wait and see if it starts to head higher or not. I don't know yet. It depends on whether I can find a replacement for them. |
