As the market faltered in the past few weeks, some
conservative plays inched ahead.
The Nasdaq fell as much as 5.5% from its early March intraday
high. Meanwhile, diversified utilityDTE Energy (
) rose almost 3% in the same period.
Income investors love those kinds of divergences. However, if
a bear market were to develop, utilities wouldn't necessarily
provide much shelter.
During the 2008-09 bear market, the electric utility industry
group dropped 49% while the gas and water groups fell 40%. The
S&P 500 fell 58%.
DTE Energy is composed of diversified utility operations,
including electricity and natural gas. The electric and gas
operations date to 1903 and 1898, respectively. Other DTE
businesses are engaged in gas pipelines; gathering and storage;
power and industrial projects; and energy marketing and
The electric segment serves 2.1 million customers in
southeastern Michigan, including Detroit. The gas segment serves
customers throughout the state.
The stock has several things going for it besides the fearful
mood of the market.
Cash flow from operations is exceptionally strong. In 2013,
cash flow per share was $10.26, or about 150% greater than EPS.
This would suggest the utility has plenty of elbow room to keep
paying the current $2.62 a share dividend.
The annualized dividend yield is 3.6%.
The five-year Earnings Stability Factor is 5 on a scale of 0
(calm) to 99 (erratic).
Annual EPS growth ranged from 3% to 6% in the past three
years. The Street expects earnings to grow 6% this year and next
year. Both reflect upward revisions.
Apart from reclassifications and eliminations that adjusted
revenue downward, electricity accounted for 49% of revenue in
2013; power and industrial projects, almost 19%; energy trading,
17%; natural gas, 14%; and storage and pipelines, 1%.