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3 Dividend Stocks for Your Watchlist

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Whether it's water, electricity, gas, or any other power source, utility companies are an essential part of everyday life. This makes them ideal for investor consideration. Let's look at three companies that would make a great addition to your watchlist. We can help you keep tabs on your investments with, our free, personalized stock-tracking service. 

Here are three dividend stocks to consider adding to your watchlist.

The up and comer
Operating primarily in utilities, transport and energy, and timber sectors, Brookfield Infrastructure Partners (NYSE: BIP  ) is a relative newcomer. Since going public in 2007, Brookfield has seen its net income go from $17 million to $457 million. Pretty good, right? Let's take a closer look.

Currently, Brookfield has a dividend yield of 5.1%, while the industry average is 3.6%. Add to that a free cash flow of $78 million, interest coverage of 4.43, and a dividend that's grown 37.4% since 2009, and you're looking at a solid, growing company.

The poised for regrowth
To say that electricity and natural gas company National Grid (NYSE: NGG  ) has had a rough few years is an understatement. Since 2008, National Grid has seen its net income from continuing operations drop from $3.1 billion in 2008 to $2.1 billion in 2010. But is National Grid poised for a comeback?

Currently, National Grid's P/E ratio is 11.9. Compared to peers Consolidated Edison's (NYSE: ED  ) P/E of 14.13, Duke Energy's (NYSE: DUK  ) P/E of 17.85, and American Electric Power's (NYSE: AEP  ) of 15.27, National Grid looks like a good value. Additionally, National Grid has a dividend yield of 4.1% compared to the industry standard of 2.7%. Moreover, its free cash flow is $2.3 billion, with an interest coverage of 2.04.  

And the icing on the cake? Between 2009 and 2010, National Grid grew its dividend paid per share by 8% and increased its net income from continuing operations to $3.4 billion in 2011. Not too shabby if you ask me, and all in all, National Grid looks good by the numbers.

The not so hot?
The first time I heard of PG&E (NYSE: PCG  ) was when I was watching Erin Brockovich, so I have to admit I'm slightly biased against this gas and electric company. So let's let the numbers do the talking. Since 2008, PG&E has seen its net revenue fall from $1.2 billion to just under $1.1 billion. Not great, but not the worst either. Let's keep looking.

Currently, PG&E has a P/E ratio of 17.3 compared to its industry standard of 14.7. This shows that PG&E is slightly overpriced compared with its competitors. Additionally, PG&E's dividend yield is 4%, which is under the 4.3% average. The bad news keeps coming when you look at free cash flow. As of Dec. 31, 2010, PG&E had a negative cash flow of $596 million. Not good when you consider dividends get paid from free cash flow.

There are, however, two positives working for PG&E. First, it was able to raise its dividend paid per share by 8.3% since 2009, and second, its interest coverage is 3.43. So is a growing dividend enough to get me excited about PG&E's future? Maybe, but I'm going to wait and see if its P/E drops.

My Foolish bottom line
All utility companies are not created equal, but if you find one that looks good by the numbers, it'll often come with a great dividend. Add to that the fact that utility companies are a necessity -- no one wants to go back to candles and outhouses -- and you've got a company that could make a great addition to your portfolio.

Consider the three stocks above along with the 13 names in a free report from Motley Fool expert analysts, "13 High-Yielding Stocks to Buy Today." A senior retail analyst dubbed one of the picks "the dividend play of a lifetime." Tens of thousands have requested access to this report, and today I invite you to download it at no cost. To get instant access to the names of these 13 high yielders, simply click here -- it's free.

Fool contributor Katie Spence still has nightmares about sub-pump monsters but is working on it in therapy. She does not own shares of any company named above.

The Motley Fool owns shares of Brookfield Infrastructure Partners P.. Motley Fool newsletter services have recommended Brookfield Infrastructure Partners P. and National Grid. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (63)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 26, 2011, at 5:48 PM, DougFC36 wrote:

    My brother who lives in Ca and has since the early 70's calls PCG, Pilage, Gouge and Extortion.

  • Report this Comment On May 27, 2011, at 2:50 AM, Clint35 wrote:

    What's a sub-pump monster? What's a sub-pump? Good article.

  • Report this Comment On May 27, 2011, at 9:31 AM, TMFKSpence wrote:

    Hi Clint, glad you liked the article! A sub-pump is used in areas where a basement (or any other structure) is below the water table. Basically it keeps the basement from flooding. When I was growing up in Minnesota, our basement had a sub-pump that made HORRIBLE noise! And my Grandpa use to tell me, my brother and my sister that the noise came from the sub-pump monster who lived down there. :)

    Katie Spence

  • Report this Comment On May 27, 2011, at 9:34 AM, TMFKSpence wrote:

    And to be completely accurate, it's called a "sump pump" but as little kids we called it a sub-pump.

  • Report this Comment On June 03, 2011, at 12:49 PM, mikepriz wrote:

    I would stay away from PG&E. California's environmentalist are squeezing the life out of energy. For example, they have laws requiring all energy to be renewable by a certain date. California has canceled their contract with IPP, the coal fired power plant in Delta, Utah. By the time California figures out that they cannot attain their goal of all renewable energy, it will be too late. IPP, like all power plants, sell its power years in advance. They have contracts that run 10 to 20 years in advance. By 2020, California will be in serious trouble!

  • Report this Comment On June 04, 2011, at 3:23 PM, shbeavers wrote:

    I'm confused as I thought NGG and PCG are both in the same industry, utilities. However, the average dividend for NGG' universe is cited at 2.7% while the average for PCG's is 4.1%. Could you clarify?

  • Report this Comment On June 09, 2011, at 10:18 AM, TMFKSpence wrote:

    Hi shbeavers,

    They are both utility companies, but are different types of utility companies.

    Katie Spence

  • Report this Comment On June 14, 2011, at 8:19 PM, bearcatinf wrote:

    Let's keep it simple. Is PG & E a sound investment for the next 10 Years? Cutting out all the BS of course.


  • Report this Comment On June 14, 2011, at 8:27 PM, Beagle2Mars wrote:

    I bought NG when it was recommended by Inside Value a few months ago. Thank you! It's up already and that dividend reinvested is great!.

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10/25/2016 4:02 PM
BIP $34.11 Down -0.05 -0.15%
Brookfield Infrast… CAPS Rating: ****
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ED $73.65 Up +0.48 +0.66%
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PG and E CAPS Rating: **