I added 53 additional shares to my Avista holding. This particular purchase will increase my annual income by $61.48 and comes with a solid yield of 4.95%. I haven't purchased any utility stocks since 11/17/2011 so it's been a whole year! As an income investor, I'm a huge fan of utility stocks. I like the safety and stability this particular sector offers. However I felt the sector was overvalued most of 2012 which is why I haven't bought any utility shares in a long time. Post election, utility stocks are looking attractive once again!
Avista is a electric & gas utility that operates in Washington, Idaho, and Oregon. Power sources: 51% hydro, 36% natural gas, 10% coal, 2% biomass, 1% wind. Shares of its stock are currently trading at the 52 week low due to a poor earnings report. AVA is a dividend contender with a 10 year streak of rising dividends. I anticipate future dividend boosts to be modest but higher than inflation.
It seems utility companies are going through a transition right now. The trend is moving away from coal power generation and moving towards natural gas. There are a couple factors impacting this change. First of all, the Obama administration is keen on clean energy. EPA regulations are tightening down on pollution controls which makes natural gas a good solution. It's a lot cleaner than coal. Many coal power plants are old and need to be upgraded. Even though carbon-capture technology is available to reduce coal emissions, the technology is expensive to install. Secondly the US has access to a massive reserve of natural gas due to new drilling methods. With such a huge supply, the price of the commodity is now very cheap. The way I see it, cheaper raw materials, lower emissions, and government regulation is the driving force for the future of natural gas power generation. I expect coal powered generation to diminish over time.
Right now I own only two utilities. AVA from the northwest and UNS from the southwest. I'll be looking to add 2-3 additional utilities to my portfolio in the coming months. I currently have a limit order in for SO and like what I see from PPL. This would complete the geographic diversification I'm looking for. Besides utilities, I'm currently interested in O, RSG, TD, INTC, and perhaps NSC. I've made quite a few purchases this month and might have to pace myself a bit. Its hard to keep money on the sidelines right now as investor fear mounts and prices fall.