Investors tend to lump utilities together in their minds. But the sector is far from a homogenous group.
By digging into the annual reports of all 74 companies in our Utility Update, we learned that just 18 operate only regulated utilities. Just 13 companies generate all of their revenue from a single business unit, whether it's water, natural gas, electricity, or power generation.
Several of our utilities draw revenue from surprising sources. Hawaiian Electric ($32; HI) and CMS Energy ($34; CMS) own banks, while Allete ($53; ALE), Black Hills ($51; BKH), and Vectren ($44; VVC) operate coal mines. Still other utility companies run construction businesses — MDU Resources ($22; MDU) and Southwest Gas ($58; SWX). Otter Tail ($33; OTTR) generates nearly half of its revenue from metal parts and PVC pipe.
Our last extensive published overview of the utility sector was in the March 30, 2009, issue of the Forecasts, available in the Subscriber Area at www.DowTheory.com. Today's revenue composition for companies in our Utility Update is fairly consistent with that from six years ago. The breakdown of revenue coming from regulated utilities (65%) and nonregulated operations (35%) has barely budged. Among regulated operations, electricity still dominates, accounting for 77% of revenue.
For our Top 15 Utilities Portfolio, regulated utilities generate 75% of total revenue, compared to 54% six years ago. But today, electricity accounts for a smaller portion of sales (39% versus 43% six years ago), while natural gas has risen to 27% from 11%. Our exposure to other regulated operations, such as water and steam, has also increased to 8%.
We are making some changes to our Top 15 Utilities portfolio. New Jersey Resources ($31; NJR) and Portland General ($36; POR) are replacing AmeriGas Partners ($47; APU) and UGI ($33; UGI).
ANATOMY OF A UTILITY
Below we break down the revenue for each of the 74 stocks in our Utility Update. We are removing Energen ($65; EGN) from the Utility Update following the sale of its natural-gas utility to Laclede Group ($51; LG). Several other companies have moved from one group to another. See our Utility Update for more statistics.
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