Dear Mr. Berko: I have been reading your column for 30 years and want to comment before asking a question. When you criticize the American consumers, as you did when at The Chicago Forum on Global Cities, it sounds like a put-down. I was miffed when you said that Americans are "stupid" consumers — that they borrow to excess and that most don't know how to manage their cash flow. And your comments about our garages were offensive. I'm not saying you're wrong, but it would go down better if you were more forgiving. After all, Americans have the most successful economy in the world. Please accept this as positive criticism; otherwise I love your column.
Now, I have $23,000 to invest and need your recommendation of three utility stocks for growth and income. Thank you in advance for your answer and all the good help you've given to your readers. — CS, Joliet, Ill.
Dear CS: Thank you for your soft criticism, though I sense my remarks scored a bull's-eye. I doubt that the following comments, excerpted from my speech, were overboard or offensive: "Americans purchase and own more junk than any other nation on earth. We are the only people who will borrow $35,000 for a new car and then park it in the driveway or on the front lawn. It's parked there because the garage is stuffed with crap that's packed tighter than pickles in a jar. Your smelly garage or your neighbor's garage is probably crammed with an old TV set, boxes of used clothes, broken bicycles, a boat trailer, a gas generator, old tires, a clothes dryer, plumbing fixtures, engine parts, a stereo and speakers, stacks of magazines, and numerous pieces of furniture. At $13.5 trillion, the U.S. has the highest aggregate household debt in the world, and looking into those garages, there's no reason to wonder why. Japan ranks second, with $3 trillion, followed by China at $2.5 trillion and the U.K. at $2 trillion. Americans are certainly the most irresponsible consumers in the industrialized world and may be the dumbest investors, too." I apologize if you think I am off base.
Meanwhile, here are three utilities that should perform well over the next decade. If you buy them, please tell the stockbroker to reinvest the dividends when he buys the shares for you. It can be done automatically and at no charge.
Duke Energy's (DUK-$69.50) $3.30 dividend, which has been raised frequently, yields 4.8 percent. DUK uses natural gas, coal, hydroelectricity and nuclear fuel to serve its 7.3 million customers in both Carolinas, Ohio, Florida and Kentucky and should generate revenues of $24 billion this year. Solid revenue, income and dividend growth over the coming four years is expected by Argus Financial Services, UBS and Thomson Reuters. The price consensus is $90 in the next three years. Earnings could come in at $5.50, and the dividend could reach $3.75.
PPL Corp.'s (PPL-$30.13) dividend of $1.49 yields 4.9 percent, but the shares have been moribund during the past seven years. However, Jefferies, Morningstar and Barclays have reason to believe that PPL is turning the corner. They suggest that PPL's acquisition of Louisville Gas and Electric Co. and Kentucky Utilities Co. will finally add some juice to its earnings and dividends. Meanwhile, expected rate hikes in its Pennsylvania service could bring an extra profit of $167 million to the bottom line. The 2018-19 consensus suggests that PPL will grow revenues to $14.3 billion (up 11 percent), that share earnings could register $2.70 (up from $2.30) and that the dividend could be raised to $1.65. Morningstar thinks PPL will trade at $40 in the coming three to four years.
NextEra Energy (NEE-$96.10), of which Florida Power & Light is the principal subsidiary, pays a $3.08 dividend, which yields 3.2 percent, and that dividend has increased every year since 1995. Revenue and book value growth has been almost as attractive, and significant expansion in the Florida economy will put more zip-a-dee-doo-dah in NEE's performance. The recent acquisition of Hawaiian Electric will add $3 billion in revenues and $170 million in profits to NEE's income statement. Credit Suisse, Raymond James Financial and J.P. Morgan are bullish on NEE and believe there are 20 more points in the stock, plus excellent dividend increases over the next three to four years.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.