Andrew Bischof (Morningstar, DUK, AEP)
Jan 11, 2017|
Andrew Bischof (Morningstar, DUK, AEP) by The Financial Exchange
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
We are joined now by Andrew bitch off of Morningstar here for stock talking we've got a couple of utilities to talk about today Andrew is that right. Absolutely let's start first with American Electric Power this is. You know really a staple I think of a lot of people's portfolios over the last thirty to forty years but can you talk about why. You're looking at this company right now and if you're bullish or bearish on the. You know America America electric powered chain about a 5% cut discount to our fair value. And it Q being around a corner half. Using our percent which is above the current three and a half percent. And we really like their capital plan. Particularly it's movement in Q transmission investments which we viewed as highly. Competitively advantaged when you look at transmission probably like that it regulated at the federal level they. They get a lot less noise that you're allowed prior Lott's return. And we up as he very significant runway for growth here if you think about all Kohl retirement. He continue renewable built out and just aging infrastructure. And they have around that we can use it very long I have to prepare us for that America like a par which is he largest transmission are in the US. How does transmission factory in when you talk about the growth of things like rooftop solar is that potentially impact there does not affect that side of the business. It'll affect that that Tibetans as much about it you're looking at route counselor mark. Looking at localized interconnection agreement but it's more so the commercial scale cardinals in the in transmission in large scale or feels though are they large scale kind of wind farms. Looking at eight EP is there anything geographically that's appealing about the states they operate in. That they do operate in some of these shale plays which now apparently he. You'd have seen kind of load. Can he be strong in those areas but they do operate. And I've been reversed yeah he's facing up and down across the characters. You mentioned that the yacht the dividend on this is just shy of 4% right now how does that compare to the rest of the utility sectors a hole. Eric as a sector or around three half percent faster in about national city. Basis points in yield with Americans are. How consistently they've been boasting that up over the last couple years it's something where you know on an annual basis you get you know once and boosters have been a little bit more sporadic recently. It was he peca line about 5% in our five your outlook now and we think that he. Beacon also he growth and evident probably a little bit lower range of that around 4%. Very good let's turn over now and talk a little bit about Duke Energy. Duke Energy operating predominately out of the south the Carolinas Georgia plays like that does that make it a little bit higher growth just because of all the business that's odd going on down there right now. Yes so it would like deeper for multiple reasons that one you mentioned and there's a lot of capital growth opportunities for them they're gonna spend about 10% of their point two billion dollar capital program which we think can drive 5%. Ernest goes in the does towards you know the containment toward natural gas generation renewable build out and just general environmental capital. Partly to also operate in very highly constructive regulatory environment but in thank you mentioned North Carolina border very. Constructive which we think what helped protect apple our turns in an increasing rate environment and we are so really like with management in the town and carry Coke in the business towards regulating operations and away from Sunday. LS incredibly advanced business it's an event. A duke also asked about a four and a half percent dividend he did even a little bit more income. Then what you're getting coming off of American Electric Power correct. Cracks at least at least the F one half percent and you know the it growth in line with that earning trust again about the race. Point difference that. It renewable that was the properties capital initiation parents treated by on 9% discount to record by investment. An industry that we view that 10% over. What are the concerns that people have when investing in utilities is that they can be very sensitive to movement in interest rates and that's one of the reasons. That these companies have sold off a little bit in the last six months is rates have gone up and people of moved out of utilities. As a result. Is that a concern all over the next year. Getting it to particularly as we move on to you know new administration potential for additional economic growth you know higher interest rates does. You have to be a concern pre utility investor. If you look historically utilities have while they have. Giving yourself absolute returns an iron in their environment that you tend to underperform the SP 500 during the period. All right very good Andrew thank you very much for joining us today. Yeah Andrew bitch off of morning star talked about a couple of utility stocks in Duke Energy with the ticker do you pay. An American Electric Power with the ticker AEP. And those dividends are tax qualified track. Right they are tax qualified dividends so what that means is that if you were in the ten or 15% tax bracket and you have the minute after tax account. You don't pay any tax on those dividends if you are in a higher tax bracket 25% or both in there and an after tax count. You'll pay 15% who gets you a little bit of help on your taxes each year. But you're you're getting a 4% dividend on a company that's not gonna go out of business right Duke Energy is not an eagle. Out of business they're going to be able to continue to pay that dividend. You know the stock may not do as much as C growth stock would do that young getting he'd like you're waiting still make it 4% in the bank. You can tell you that million non.