Investors trying to create a reliable stream of income from their portfolios should probably include a few boring stocks in the mix. A good place to start on that front is utilities.
Utility stocks have historically been considered so safe that widows and orphans can own them. Dividend Kings, companies that have increased annual dividend payments for 50 consecutive years or more, are also worth looking at.
The six companies featured below are utilities that also happen to qualify as Dividend Kings. This should make them extra interesting to conservative dividend investors. Here's why.
1. American States Water
American States Water (AWR -0.57%) is a fairly small utility given its $3.2 billion market cap. It serves over a million customers across nine states, though it is actually a mix of a water utility and an electric utility. Most of its utility business is located in California, with its operations outside of the state largely dedicated to operating water services at military bases. The dividend has been increased annually for 69 consecutive years. Although the company's dividend yield is a somewhat miserly 1.8%, the dividend has grown at a compound annual rate of nearly 9% over the past decade.
2. Northwest Natural
Northwest Natural (NWN -0.88%), with a $1.5 billion market cap, is a utility holding company that operates natural gas, renewable power, and water assets, largely in the Pacific Northwest. It also has some water assets in Texas and Arizona. The company serves around 2.5 million customers. The dividend has been increased annually for 67 years. The yield is nearly 4.5%, with the average annual increase over the past decade coming in at less than 1%. The yield is clearly the main attraction here.
3. California Water Service Group
California Water Service Group's (CWT -0.25%) market cap is roughly $2.9 billion. It serves over 2 million customers via its California Water Service, Hawaii Water Service, New Mexico Water Service, Texas Water Service, and Washington Water Service subsidiaries. The dividend has been increased annually for 56 years. The average annual increase over the past 10 years was just shy of 5%, though more recent increases have been in the 7% area. The dividend yield is about 2%.
4. SJW Group
SJW Group (SJW -2.39%) has a market cap of $2.2 billion. The company operates through subsidiaries like San Jose Water Company (California), Connecticut Water Company, Maine Water Company, and Canyon Lake Water Service Company (Texas). It also operates SJW Land Company, which owns commercial buildings and undeveloped land in multiple states. It has around 700,000 water utility customers. The dividend has been increased for 56 years, with an average increase of roughly 7% over the past decade. The yield is a touch shy of 2.2%.
5. Black Hills
Black Hills (BKH -0.63%) has a market cap of nearly $4 billion, making it one of the larger names on this list even though it is still fairly small relative to the utility industry's largest players. The company provides natural gas and electricity to 1.3 million customers in Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. The dividend has been increased annually for 53 consecutive years, with a 5% annualized dividend growth rate over the past 1-, 3-, 5-, and 10-year periods. That's a somewhat shockingly consistent level of dividend growth. The dividend yield is around 4.2% today, providing investors with an interesting mix of income and reliable dividend growth.
6. National Fuel Gas
Rounding out the list of Dividend King utilities is National Fuel Gas (NFG -1.95%), which has a market cap of around $4.7 billion. The company is a bit different from the others listed here because its natural gas operations include exploration & production, pipeline & storage, gathering, and utility assets. While it provides exposure to the entire natural gas value chain, its financial results will also be more exposed to commodity price impacts than most utilities. Stock price volatility has been high as well. The dividend has been increased each year for 53 years, with an annualized increase of about 2.5% over the past decade. The dividend yield is roughly 3.9%. Given the nature of the business, more conservative dividend investors will probably want to avoid this utility stock even though it is a Dividend King.
Time to dig in
Of the companies listed above, Black Hills appears to offer the best combination of dividend yield and dividend growth. American States is the winner with regard to dividend growth, but investors have clearly recognized that fact and awarded it a premium valuation. That said, if you are looking for a dividend-paying utility for your portfolio, all of the Dividend Kings above are worth a closer look.
