Feb 20, 2013|
Stock Talk - Charles Fishman, Morningstar
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Charles Fishman is an equity analyst at Morningstar he covers the utility sector Charles welcome to the show thanks for joining us Good Morning America. I love utility stocks and the first one that year we're gonna chat about Exelon. Is one that I'm pretty sure I -- in my portfolio why do you like excellent. Well but if it is the only. Utility -- that Morningstar rates is what we call our wide -- in other words it's gone and that's that. Are very difficult to replicate its -- the largest nuclear fleet in the United States arm. In the end to build new nuclear plant is very difficult if President Obama moves forward with his intention to. Restrict carbon. Emissions. Nuclear power is really -- Only way you can get massive amounts of power. That apartment for another word is yes wind solar do help. But the way you produce a whole lot of power is with nuclear without emitting carbon so. Certainly -- those assets become very valuable. Especially given what it cost to build a new nuclear play great I mean you basically. You can -- you you can't get a price quote on what it cost to build a new nuclear -- they they well they don't know how much Danica. Where did you come under construction southern down in Georgia is built one it unfortunately is going over budget and you know and and it's especially problematic with today's next guest is because people are saying hey wait a second why are we spending all this money when we can build a -- this plant. For a lot less and you know that's a valid argument but you know who knows what's gonna happen over the next fifty years which is -- at that point. What about the dividend well it looks a little high. Given their earnings -- what -- They've recently -- it now all they did briefly cut it and now it's subtle level that we believe is sustainable okay. -- -- and then you also have Great Plains Energy. The symbol for Alan GXP. Lou Y Dele Great Plains Energy. Well for investors to. Doesn't wanna take the risk what's gonna happen with climate change what's gonna happen with gas prices -- as we discuss what that salon if you're looking for just a pure. Regulated utility like enough you know -- hear your grandfather's. Utility. A 100% regulations. You do get the risk of regulators treating that you deal till the early. The great plains would be a good investment it is treated. At a discount -- -- installed those. Bomb. Over time but that's because during regulation which is about 70% of its assets has been just a tough place to do business we -- finally -- Some improvement in the way Missouri regulated utilities and that's why we we'd like great -- 4% yield. The green and it you know for -- -- -- fixed income investor looking for a deal. You're taking a little more risk when you're dealing with the common dividend. But if you're gonna do it is choosing a regulated utility in an improving. Regulatory environment. We think is good way to go. In both of those so far the we've talked about -- on -- great plains those are qualified dividends. Meaning if you're a really low tax -- pay no federal income tax on that dividend and if you're in. Modest tax bracket like under 39% you're paying 15% tax. Direct -- -- misconception that a lot of people are evident just because you know the headlines -- obviously. You know spoke about the tax increases on dividends but that didn't affect the majority of people obviously. Right right. And then what was your last one I think I might have had the symbol and correct for your third. Well it's that you probably the when you -- it up it's actually trading at a Madrid exchange -- art -- -- that's the Spanish utility and you know what I say Spain people go -- my gosh -- You know if I compare to what happened in California. -- around 2000. You know you can't have your utilities just go down the -- you -- it's too important to the infrastructure. Eventually Spain will start treating the utilities fairly. He -- has this been in this business just about my whole life I think it's one of the best management teams in the world com. They have moved. You know it most of their investment now is going to South America they're the largest owner of wind farms in the world. Indeed they have driven down the cost of operating wind turbine to lower than anybody in the industry. They are really good at this but eventually the problems in Spain gets fixed if we're dealing -- somebody that's a long term investor. It's willing to take a little more risk and Great Plains Energy. Not a bad place to be units. Great. Dividend right now that you know the the management has said they intend to play it for the next two to three years and it's at 270%. Annual list of outlook so it's. Just just a well run utility it in a country that. You know does it have -- issues. Output while I. -- yeah I agree if you disease it the year utility bill is something that gets paid at the end of the -- you might skip your mortgage payment. But you're not gonna skip your electricity bill because you know what they'll shut you off and then -- -- Our society is there's too dependent on electricity we have to keep the electric infrastructure. Any country any state -- keep it. Maintain and the only way you do that is allowing utilities to achieve a fair rate of return Spain is not doing that right now. Stay well and then there's that they are already moving in that direction so it does I think question time. You know no I I agree with you and I love your picks thank you very much these are terrific. Speaker if there Charles that's Charles fashion folks he's an equity analyst and you know. Sometimes. And you find this hardly did but I get accused of being boring with a lot of the stocks that I bought an iPod. Well I'd buy stocks like that in and here's lab by the you know you get your dividend yield you're you're you're put in your coupon of 45%. Aren't so great you're that your ears you know might some people say -- wanna make 20% -- make 30%. Clean up only two of you by utility stocks your return on average is going to be. In over along -- time you're gonna make seven or 8% on your money you know point 4% -- he make another 3% maybe 4% of your lucky. In terms of growth facilities so low of these those little Maida the LC a dividend paying stocks end lower beta. High income dividend paying stocks you know what I'd buy him all I'm not you know -- like -- I'm. I'm I'm a boring investors and I hate your single boring him it's OK I don't we you can call -- -- it's not -- -- -- It was a nice way of saying boring. That's a polite way. He thinks you are so polite viewers totally. Up next we're gonna talk opening it is symbols for the stocks and a lot of B rating that -- on EXCE. Great plains was GXP. And hybrid dole law. It's it is because it's a foreign stock it's I'd be. EMC. In your by buying that for about three bucks a share. And that probably. That last stock that Charles was talking to us about clearly the riskiest. Stock of the match but you know what that might be where he can make some good money and you're gonna get paid a seven maybe an 8% dividend while you wait. But the stock price to recovers and that's why. He he picked that. Up next we're gonna talk about -- and Poland has expressed an interest in joining the eurozone which I think is terrific news. Not only for is a great news for the eurozone but it's great news for Poland and we'll talk about why when we come back.