Coal-Fired Utility Stocks May Benefit If Romney Wins


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"And by the way, I like coal."

It takes courage to say that, and Mitt Romney's remark in Wednesday's presidential debate drew investors' attention.

If Romney is elected president, how could income investors play a friendlier environment for coal?

One way is coal-fired utility stocks. The Obama administration's Mercury and Air Toxics Standards rule gives coal-fired utilities until April 2015 to meet the new regulations. The cost of compliance is significant. In some cases, it will involve retirement of units.

Meanwhile, Reuters recently reported that the decline in the price of coal and the rise over the past six months in natural gas prices have some utilities turning to coal to generate electricity.

In April, the price of natural gas was less than the price of coal. Historically, coal is cheaper than natural gas, so the two commodities are back to a more normal relationship.

Let's take a look at five companies with coal-fired units.

Minnesota-basedXcel Energy ( XEL ) has a dividend yield of 3.9%. The five-year EPS stability factor is a calm 3 on a scale of 0 to 99. EPS is expected to grow 3% this year. The stock is 6% off its 52-week high.

North Carolina-basedDuke Energy ( DUK ) has a dividend yield of 4.7%. The EPS stability factor is 6. Earnings are forecast to slip 2% this year. The stock is 8% off its high.

Based in New Jersey,NRG Energy ( NRG ) has a dividend yield of 1.6%. Because of losses in 2011, the stock lacks an EPS stability factor. Earnings of 95 cents a share are expected this year, up from a loss of $1.84 a share. NRG is near a new high and a 23.01 buy point in a flat base. The pattern also could be seen as a 14-month-long cup with handle with the same buy point.

Ohio-basedAmerican Electric Power ( AEP ) has a dividend yield of 4.2%. The EPS stability factor is 5. Earnings are expected to dip 2% this year. The stock is less than 1% off its high.

Georgia-basedSouthern Co. ( SO ) has a dividend yield of 4.3%. The EPS stability factor is 3. Earnings are expected to grow 4% this year. The stock is 5% off its high.

Ohio-basedFirstEnergy (FE) yields 4.9%. EPS stability is 6. Earnings are expected to drop 7% this year. The stock is 12% off its high.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: AEP , DUK , NRG , SO , XEL

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