3 Stocks to Power Your Portfolio Through Market Turmoil
Utility stocks give investors a safe place to put their money during unstable market times: They pay out great dividends, provide an irreplaceable necessity, and seldom nosedive. Besides rare exceptions, utility stocks won't shatter a shareholder's portfolio and will keep things steady through downturns. With concern mounting over a global economic slowdown, let's take a look at three utility stocks to provide a safety net for investors.
Turning to the South
A promising pick comes in Southern Company (NYS: SO) , the electricity provider in Georgia, Alabama, and the surrounding region. The company distributes industry-beating dividend returns of 4.1% that grew 3.8% year over year the past five years. Although Southern sports a dividend payout ratio of 77%, it offers solid markers of financial stability. The electricity provider boasts net margins of 13%, nearly twice the industry's average net margins of 7%. Net income has grown 34% from 2009 to 2011, rising to $2.2 billion.
While these numbers promise stability, Southern's real windfall comes in U.S. demographic shifts. Georgia and Alabama both realized strong population growth between 2000 and 2010, with the former up an exceptional 18.3%.
Southern's future plans bolster its positive outlook. The company launched development on two new nuclear reactors in Georgia in 2010 to deliver reliable long-term energy production. Southern made further moves in slashing its electricity from pollution-heavy coal down to 35% of total power generation over the past five years. During that time frame, the company increased natural gas-fueled electricity production to 47% of its total. These actions protect Southern from the specter of coal regulation, while increasing its benefit from natural gas' cheap prices.
Centering your portfolio
Like Southern, Centerpoint Energy (NYS: CNP) reaps rewards from demographic shifts. The company services customers in Oklahoma, Texas, Arkansas, Louisiana, Minnesota, and Mississippi, with five of those six states seeing significant population growth from 2000 to 2010.
That ends up with more customers to Centerpoint, the winner of JD Power's 2012 customer satisfaction award for a Midwestern utility. The company has to love Texas' appeal in particular, servicing many of the state's retail electricity providers and recently inking deals there to increase its natural gas collection and processing ability. Texas' population swelled by 20% from 2000 to 2010, the largest gain for any state with a population above 10 million. The state's lack of state income tax should contribute to that growth in the coming years. Texas' business climate doesn't hurt, either, evidenced by its winning of CNBC's 2012 award as the top state for business.
Along with these positive trends, the stock also gives back to its investors with a nice dividend. Centerpoint currently yields 3.9% at a five-year dividend growth rate of 4.4%. A dividend payout ratio of 25% -- unbelievably low for a utility company -- should give investors plenty of optimism in Centerpoint continuing to grow its future dividends.
Excel with Exelon
Chicago-based Exelon (NYS: EXC) gives investors another great company to place their confidence in. Although Exelon lacks raw population growth in its primary client region, an area that includes Ohio, Pennsylvania, New Jersey, and Illinois, it greatly succeeds in other metrics.
The company sports the industry's highest dividend yield, at 5.4%. Exelon's five-year annualized dividend growth rate comes to 5%, ranking near the industry average. As the top-ranked FORTUNE 500 utility for the past five years and the largest competitive power generator in the U.S., Exelon has the size and diversified customer base to rise above any market fears. It currently owns 35,000 megawatts of capacity and has operations in 47 states. Exelon further inspires confidence in boasting a manageable long-term debt-to-equity ratio of 0.8 that beats the industry average, and adds strong net margins of 11%.
Don't get beat by a temperamental market
Investors concerned about the doom-and-gloom predictions out of Wall Street's economists couldn't find many safer places to invest their money than these three utility giants. People will always need energy regardless of the economic climate, and these reliable companies will keep on powering homes and portfolios for many years to come.
Stable stocks yielding great dividends can help any portfolio hedge against market volatility. To unearth more picks giving back to long-term investors, take a look at The Motley Fool's free special report, "Secure Your Future With 9 Rock-Solid Dividend Stocks." Solid dividends can mitigate any economic swing; find out more by clicking here.
The article 3 Stocks to Power Your Portfolio Through Market Turmoil originally appeared on Fool.com.Fool contributorDan Carrollholds no positions in the stocks mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Exelon and Southern and creating a write covered straddle position in Exelon. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.