If you like boring dividend stocks, then looking at utilities is a good place to start. But all utilities aren’t the same, which is why you’ll find Black Hills (NYSE: BKH), NextEra Energy (NYSE: NEE), and Eversource Energy (NYSE: ES) all worth a closer look as November gets started. The big story here, however, is that each one of these utility companies is attractive for a very different reason.
Don’t feel too bad if you’ve never heard of Black Hills. With a market cap of roughly $4.1 billion, it is a pretty small player in the utility sector. It serves about 1.3 million electric and natural gas customers in parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. It’s a pretty boring business, though it has benefited and will continue to benefit from the fact that its customer base is growing at a rate that’s nearly three times faster than overall U.S. population growth.
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Still, the real attraction here is Black Hills’ slow and steady pace of dividend growth. Over the past decade, the dividend has been increased at a roughly 5% annualized clip, which is pretty good. But the dividend itself has been growing each and every year for 54 consecutive years, making Black Hills one of the few Dividend Kings in the utility sector. Now add in the stock’s 4.4% dividend yield, which is notably above the 2.7% utility average. Sometimes good things do come in small packages.
If Black Hills is the slow and steady tortoise, then NextEra Energy is the hare. That shows up most notably in the 11% annualized dividend growth it has achieved over the past decade. That’s a shockingly large number for a utility, where low to mid-single digits is considered a solid outcome. To make the dividend story even more attractive, NextEra has increased its dividend every year for three decades. That’s not quite as good as Dividend King Black Hills, but add in the dividend growth and you can see why investors like NextEra’s stock.
The growth story here is driven by two businesses. First, NextEra has a solid foundation in the regulated utility space with Florida Power & Light. It has benefited for years from in-migration into the Sunshine State. Atop that strong core, NextEra has built one of the largest solar and wind companies on the planet. And clean energy still has a huge runway for growth ahead, so there’s no reason to think NextEra Energy’s dividend growth story is about to stall out.
