Micro Blog #24: Which Utility has Paid the Most Dividends in the Past 10 Years?

Too often we get hung up on the dividend growth percentages and forget about the actual cash that gets paid as dividends over a period of time, which is what really matters at the end. Therefore, I wanted to see which ones of my five utility companies have paid the most dividends in the past 10 years in terms of real dollars and cents, given same amount of initial investment.

For this exercise, I also used FastGraphs with an initial investment amount of $10,000 in each stock. Also, the companies I am comparing are: SO, ED, DUK, D, and PPL since I own them all.

In the FastGraphs tables below, not only you can see which utilities have paid the most dividends in the past 10 years, but you can also see the dividend growth history of each of the utilities and their Yield-on-Cost.

I have listed each of the utilities in the order from highest dividend paying utility to the lowest:






SO is clearly a winner as it paid a total 10-year dividends of $5105.08 on $10,000 initial investment. DUK and ED came at 2nd and 3rd places, respectively.

Surprisingly, being a dividend investor darling, D didn't make it to the top 3 list despite its superior dividend growth rate. Also, PPL came last by a big margin, having payed only $2787 in dividends over the last 10 years. This is mainly because the starting yields on both D and PPL were much lower than SO, ED, and DUK.

The starting yield or Yield-on-Cost for D, despite growing faster than any of the other utilities mentioned, could not catch up with the total dividends paid by SO, ED, and DUK during the 10-year period.

What Does This Data Tell Us?

It is the starting yield that matters the most when it comes to which stock pays more dividends over a reasonably long period of time such as 10 years. Sure a higher DGR (Dividend Growth Rate) stock will eventually catch-up with the slower DGR stock, but it could take twice as long, and the company would have to maintain a high dividend growth rate through-out that period, not something most companies can do reliably.

Want to know how long it would take for a low yielding stock to catch up with a high yielding in dividend income? Check out my older post: How To Decide Between Low vs. High Yielding Stocks

Comments

  1. That is an excellent example to go along with the always debated high yield/ low growth vs low yield/ high growth argument. I know a little while ago T vs HRL was another example.

    Which is why I think it is important to have both in one's portfolio if possible. Especially because like you said, we don't know the future or if a company can maintain a higher dividend growth rate over time. As a company gets more mature the growth rate will slow but typically the dividend yield goes up as they are giving back to the shareholders instead of trying to rapidly growth the business since it is already established.

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    1. Well said Mr. Daze.

      A mix of both fast and slow growers is a balanced approach for most young people.

      But if you are an older dude like me who has already retired or close to retiring, the current income is more important that faster growth. Income that is dependable, predictable and growing at a reasonable rate, beating inflation is all I care about.

      I do own a few fast growers like BA, but I'm not counting on it to maintain the double digit growth rate forever. A quick look of BA dividend history will show you that it has gone through cycles of 0% or low single digit dividend growth to double digit growth, several times in the past few decades.

      High growth stocks are good for harvesting more dividends through their capital gain proceeds in a dividend portfolio. For that reason, I like to maintain a few growth names in my portfolio.

      Delete
  2. Class is in session! Excellent sir. But just as I'm trying to focus on some growth names, you dangle these juicy dividends in my face. Ughhhhh. I do need to add some in this sector however.........

    ReplyDelete
    Replies
    1. Well, you should look into adding some utes in your portfolio, especially if you don't have any. It's a good time as the utes are coming down from their sky high valuations and yields are getting really juicy.

      Utilities do grow, you know? :) And you can even find a few fast growing and juicy yield utilities like D, NEE, and WEC with 5-yr RORs of 10%, 21%, and 14%, respectively.

      I look at D as one of my growth name in utilities.

      Delete
  3. Hi Mr. ATM, Interesting analysis. I own them all (except ED) and we generally look at investing in a similar light, so don't take this the wrong way. I'm just thinking out loud....

    Cash paid is one aspect of return. And, a very important one for both of us. However, if you looked at these stocks on a total return basis it might (not sure) show a different story.

    For example, over a 10 year period D may have a similar or better total return than SO. I'm cherry picking here. Any 2 stocks might show a different story at any point in time. But I may give up a little cash today for a better total return in the future.

    So, if your up for a little more analysis in your spare time, what is the capital appreciation in each stock over the same period? If total return is similar, I'd take the cash up front like you. I suspect total return is probably similar between these stocks. Not sure without running the numbers.

    In other sectors, a growing dividend/company may result in better total returns.

    I'm just pontificating with myself here. So, no trouble either way. I debate current yield with dividend growth with myself all the time. I tend to end up with a mix in my portfolio. I have been leaning toward lower yield higher growth over the past few years since I don't need the additional cash right now.

    Nice analysis. Very thought provoking for me.

    Tom

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    Replies
    1. Hi Tom,

      Thanks for a very thoughtful comment.

      So, the Total Return data is already shown in the tables above for each stock. This is the data in green fonts, along with S&P data in the box with red fonts. You can see total returns both with and without the dividends.

      In terms of total return, ED is the only one that comes close to matching S&P total return over that 10-year period of time.

      I look at Total Return as something that would require me to sell my position to realize it and since I'm focused on building long-term assets that would pay me in cash without having to sell my assets, I tend to pay more attention to how much cash I would get from each investment year after year and without selling it.

      I guess it depends on where you are with regards to your need for current income/cash. I'm not using dividends for expenses yet, but I still want current and future cash-flows to increase so I can continue to re-invest it without selling assets.

      Delete
    2. Just to be clear, I'm not saying that total returns don't matter to me. I want to see my assets grow in the future as well, but I don't care if I don't beat the overall market.

      The cash that company pays me now and in the future is what matters most to me as per meeting the primary objective of my investments.

      Delete
  4. The good thing about utility stocks is that we are approaching the final quarter of this bull market. Utility stocks outperform other sectors in a bear market because they move more slowly. So when the market does go down, this sector goes down less than other sectors such as tech.

    ReplyDelete
    Replies
    1. That's a good point. Utilities are also considered reliable dividend payers as their earnings are from regulated operation and don't normally face economic risks during recession like other businesses.

      Delete

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