Friday, November 12, 2010

RSY XVII: Let us go buy some eGAS.

It is often handy to start with a culled list of prospects when looking for the next investment, so when exploring Seeking Alpha I ran across the following article that provided a list of 21 Utilities Yielding More Than 4.5%. Dividend seeking investors should find plenty of interesting articles and ideas at the new category that Seeking Alpha has added called Investing for Income.

Yields of 4.5% to 6.1% is definitely in the ball park of what we strive for at RSY. Utilities may not offer meteoric rise in capital gains, but it does provide stable value prospects providing long term income through dividends. Alan Brochstein mentions that public utilities acting as monopolies can more easily pass on mistakes to their customers instead of shareholders. As such, downside risks are lower than in purely competitive markets especially with respect to bankruptcy.

Now let us see how Sabrient Systems rates these potential dividend payers. (Click on tables for clearer images.)



Unfortunately, this netted us only two buys and no strongbuys on Sabrient's ratings. Most of the list is of holds with some sells and even one strongsell. Most short sellers would avoid stocks that paid out dividends like FE does at over 6%. (Vectren {WC} does not have a rating from Sabrient at this time.)

Even the two buys of PPL and DPL will not make it into the the RSY portfolio right now. The forensic accounting rating for PPL has plunged to 16 {out of 100} rating it as aggressive. Maybe they will correct their problems in the future but for now, no need to tread there. DPL has an average forensic accounting score and everything looks good...except their last ex-dividend date was on the 10th of this month. Best to hold off until we get closer to the next date and see if we are still interested at that time. Might be a good candidate for a a stock watch.

Public Utilities from MyStockFinder.
But this did inspire me to use the MyStockFinder selection tool to find another list of potential candidates. I limited the search to only Public Utilities with strongbuys and buys under a modified RSY stock search. Out of the 19 candidates, none stood out as a buy for the portfolio. {Upon further exploration RSY has one recommendation.} A brief explanation for each follows the chart of MyStockFinder results.

EBR: As it being an American Depositary Receipt {ADR}, this does not eliminate it from the selection as it would help increase diversification across countries, but it does mean that we need to be even more diligent in choosing them. This is because ADRs do not have all the same requirements as domestic equities and their reporting tends to be more spotty. The biggest problem is that dividends are inconsistent and sporadic for EBR. It appears that they plan to just make one dividend payout per year and more than likely around February each year.
SURW: No dividends paid out yet. Since RSY ranks stocks on a variety of criteria without absolute cutoffs in dividends, we will get some that have no dividends but are good buys by Sabrient's ratings system.
EGAS: Originally, I just passed on this since the ex-dividend date just passed on the 10th. But since it pays out once a month, the next dividend payout is always not far away. George Fisher at Seeking Alpha presents some good analysis about EGAS at Gas Natural: Secondary Offering and Insider Selling, Part II. The forensic accounting score is above average and even insider selling is just part of the CEOs total portfolio. Certainly any individual investor would prudently diversify even more than Richard Osborne and Mr. Fisher addresses that also in both his posts.
DPL: Already addressed with regards to original article concerning utility dividend paying stocks.
PTNR: One aspect that ADRs such as PTNR lack is a forensic accounting score and information on insider trading. Ultimately payout ratios are too high for RSY to recommend buying. Recently we also saw another ADR mislabeled, China MediaExpress Holdings (CCME). Even calling to investor contact information revealed that the information service provider had not updated CCME's current industry and sector identification.
TNE: Another ADR with inconsistent, sporadic dividend payouts. Since none are declared at the moment, RSY will pass on it for now.
SBS: No dividend.
PPL: Already addressed.
UGP: If the pattern continues, this ADR will have its next ex-dividend date on late February or early March. RSY will wait on that for now.
TEO: This ADR is short on history of paying dividends and has no future ex-dividend date declared.
MTA {Changed to MYTAY}: This ADR has been providing dividends yearly around May or April but more importantly it just got sent to the wood shed, pink sheet.
APWR: No dividend.
PT: An ADR that has been providing dividends around May or April. RSY will wait on this for now.
CTEL: RSY will wait also on this ADR.
CHL: This ADR provides dividends twice a year and the next one should be around May of next year. No need to rush on this one.
NGG: This ADR has broken its pattern on dividend payouts. Although investors still seem to be expecting the next ex-dividend date to be in December, RSY will wait on this one also.

Later, I expanded my search to more on the industrial side of the economy including sectors like energy, basic industries and transportation. The only one that stood out from that list was Marathon Oil Corporation {MRO} until I realized that the ex-dividend date was on the 15th and we needed to have purchased it at least by end of close on Friday.

Buy eGAS.
But in any case, RSY recommends a buy order of 400 shares of EGAS at a limit price of $10.01 {GTC}. Sabrient rates this as a buy based on EGAS's outstanding value profile with a value score of 91. Sabrient also indicates a strong fundamental score and stated the following.
The Sabrient Fundamental Score is the broad measure of a company's financial health, including its balance sheet, cash flow, revenue, and earnings quality. With a Sabrient Fundamental Score of 87.9, Energy West is significantly higher than the average of its industry group, which carries a Sabrient Fundamental Score of 40.1.


Stock Watch:
DPL, EBR, NGG, CHL, CTEL, PT, and UGP.

Links:
The 4 Biggest Contrarian Dividend Plays Out There

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