Utilities Peak: Searching for Good Bargains

Valuation

Currently, PPL (PPL) is trading at a forward PE ratio of 13x based on analysts’ EPS estimates for the next 12 months. PPL stock looks attractive considering broader utilities’ (XLU) average valuation close to ~18x. PPL’s five-year historical average valuation is ~14x. The valuation has risen more than 18% over the past 12 months and marginally underperformed broader utilities. PPL is trading at a dividend yield of 5.1%, which is significantly higher than peers’ average. PPL’s relatively stable earnings growth enables stable dividend growth.

Utilities Peak: Searching for Good Bargains

Edison International

Edison International (EIX) stock has notably underperformed its peers since the wildfires last year. The stock is trading at a forward PE ratio of 14.3x, which is lower than peers’ average. The company’s historical average valuation is close to 18x. Edison International appears to be trading at a discounted valuation compared to its peers and its historical average. Edison International is trading at a dividend yield of 3.8%, which is higher than utilities as a whole.

What differentiates Edison International from its peers is its dividend growth in the last few years. The company increased its dividends 12.4% compounded annually in the last five years. On average, utilities increased their dividends ~4% during the same period. Sempra Energy (SRE) is trading at a forward PE ratio of 20x.

AES 

AES (AES) stock is trading at a forward PE ratio of 13.2x. AES’s historical average PE ratio is higher than the forward multiple. The stock appears to be trading at an attractive valuation. AES offers a yield of 3%. The company managed to raise its dividends 26% compounded annually in the last five years. AES stock rose ~70% over the past 12 months. To learn more, read What led to AES’s Rally and Where It Could Go from Here.