Where Are Your Utility Dividends Headed?

Wall Street loves or hates utility companies based on the rise and fall of their dividends. But a corporation with a high dividend could be headed for destruction, while a low-yielding company might be making strategic acquisitions that'll reap long-term returns for investors. Read below for three simple steps to ensure that your dividend play isn't going to purge your profits.

When you're making a dividend play, do yourself a favor and look at more than just the dividends. For income investors, it's hard to argue with PPL's 9.9 P/E ratio (the industry average is 15.6), solid dividend, and stable margins. For growth opportunities, look to NextEra's renewables or Entergy's heavy reinvestment for the next big break. With respective P/Es of 13.2 and 12.9, both remain affordable even as they line up for expansion in the years to come. It's tempting to bet big on Atlantic Power, but the company's unsustainable dividend seems backwards to what would otherwise be a growth grab.

Source: Motley Fool

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