Morningstar

3 Undervalued Utilities for Dividend-Seekers

3 Undervalued Utilities for Dividend-Seekers
Securities In This Article
Southern Co
(SO)
Dominion Energy Inc
(D)
Duke Energy Corp
(DUK)

Travis Miller: With the rise in interest rates in the last couple of months, the utilities sector is now open for stock-pickers. There are several utilities trading at 20% discounts, but all of them face challenges. We now think on the high-quality side there are three that offer good value for investors, especially those looking for dividends.

One of those is Dominion Energy. It trades at a 15% discount to our fair value estimate and a 4.5% yield. With good growth we think this is an attractive total return, especially with interest rates still low.

Another high-quality name we think that is trading at a discount is Duke Energy. It trades at a 10% discount and a 4.5% yield. It's going to have slower growth but still a good total return for investors.

And finally, Southern Company. It's trading at a 5% yield and a 10% discount to our fair value estimate. It faces some uncertainties related to a new nuclear program, but we think it will resolve those and ultimately give investors a solid total return.

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About the Author

Travis Miller

Strategist
More from Author

Travis Miller is a strategist, AM Resources, for Morningstar*. He covers energy and utilities. North American regulated utilities and independent power producers have been the main focus of his research for more than 17 years. The companies in his coverage include some of the largest U.S. utilities as well as a mix of small- and mid-cap utilities.

Before joining Morningstar in 2007, he was a reporter for several Chicago-area newspapers, including the Daily Herald in Arlington Heights, Illinois. Previously, Miller was director of the utilities equity research team at Morningstar.

Miller holds a bachelor’s degree in journalism from Northwestern University’s Medill School of Journalism. He also holds a master’s degree in business administration from the University of Chicago Booth School of Business, with concentrations in accounting and finance. He is a Level III candidate in the Chartered Financial Analyst® program.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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