Shedding Some Light On These Lesser-Known Utility Stocks

Chesapeake Utilities Corporation ($CPK)

Chesapeake Utilities Corporation can trace its roots all the way back to 1859 when the company was known as “Dover Gas Light Company.” Over the decades, this business has continually expanded by acquiring other regional utility firms.

Today, Chesapeake Utilities Corporation operates both regulated and unregulated electric and natural gas distribution networks across multiple states, including: Ohio; Florida; North Carolina; and South Carolina.

Chesapeake Utilities Corporation has paid dividends every year for the past 64 years.

And, the company has raised their dividend every year since 2004.

Chesapeake Utilities Corporation has slightly underperformed the S&P 500 over the past decade. But the company has also consistently raised their dividend at a rate that outpaces inflation.

And with a price to earnings ratio of 21.47 and a starting dividend yield of 2.04%, this is the most expensive and lowest yielding utility on today’s list.

However, Chesapeake Utilities also delivered a better total return than its peers.

• Forward PE ratio of 21.47

• 2.04% starting dividend yield

• 5-year dividend CAGR of 9.58%

• Payout ratio of 46.57%

• 10-year average annual total return of 12.33%

While this is a great utility company, the valuation is a little too high for my tastes and the starting dividend is a little too low. Stocks like Aflac Incorporated $AFL ( ▲ 1.06% ) provide higher starting yields, faster dividend growth, and better total returns.

I know comparing an asset-light insurance company to a utility provider is a little unfair, but as Warren Buffett once said, “You don't have to swing at every pitch.”

Still, Chesapeake Utilities Corporation is an interesting company.

And I’ll add it to the watchlist.

Artesian Resources Corporation ($ARTNA)

In the United States, water utility providers hold two unique distinctions.

The York Water Company is the oldest publicly traded company in the United States. And, York Water has paid uninterrupted dividends for over 209 years.

Meanwhile, American States Water Company has the longest dividend growth streak out of any publicly traded company in the United States. American States Water has raised its dividend every year for 70 consecutive years.

And, interestingly enough, Yale University is still collecting annual interest payments on a 377-year-old Dutch water bond.

Artesian Resources Corporation is a water utility provider. And while it doesn’t have the same track record of a company like York Water, Artesian Resources Corporation has provided water service to the Delmarva Peninsula since 1905.

The company has paid dividends since 1931, and Artesian Resources Corporation has issued consecutive quarterly dividends every year since 1993.

A 3.52% starting yield with semi-annual 2% dividend raise might not seem exciting.

But, this is a geographically insulated company providing an essential service.

• Forward PE ratio of 17.13

• 3.52% starting dividend yield

• 5-year dividend CAGR of 3.79%

• Payout ratio of 42.90%

• 10-year average annual total return of 7.79%

Artesian Resources Corporation is never going to be a hyper-growth stock. Or even a market-beater. This is a regional utility that serves 301,000 customers.

That said, Artesian Resources Corporation is down -13.40% over the past 12 months. And, this is one of the highest yielding water utility stocks in the United States. This may not be an exciting business, but it is one of the cheaper water stocks. And, the company has provided a reliable stream of quarterly dividend income for over 30 years.

New Jersey Resources Corporation ($NJR)

A strong starting yield coupled with inflation-beating dividend growth can quickly develop into an incredible source of long-term income.

Case in point, New Jersey Resources Corporation.

In 2015, New Jersey Resources Corporation paid $0.93/share in total annual dividends. But every year, the company would raise their dividend by 5-9%. And now, 10 years later, New Jersey Resources Corporation pays $1.80 in annual dividends. Over the course of a decade, a utility investor would have doubled their income by holding this stock.

New Jersey Resources Corporation is a regulated natural gas utility that serves 576,000 customers across six different New Jersey counties.

The company has paid non-stop quarterly dividends for the past 73 years. And, New Jersey Resources Corporation has raised their dividend every year for the past 29 years. Additionally, this business has an inflation-beating 5-year compound annual dividend growth rate of 7.55%.

• Forward PE ratio of 15.41

• 3.69% starting dividend yield

• 5-year dividend CAGR of 7.55%

• Payout ratio of 45.74%

• 10-year average annual total return of 8.42%

A high dividend growth rate with a relatively low price to earnings ratio has always appealed to me.

And like Artesian Resources Corporation, New Jersey Resources Corporation is a geographically insulated business. It’s also worth remembering that an annual return of approximately 7.2% will double your money in 10 years.

If New Jersey Resources Corporation can continue its compound annual dividend growth rate of 7.55% for the next decade, shares would be paying around $3.60 each.

Or, a 7.61% yield on cost compared to today’s share price.