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With a name like
Public Service Enterprise Group(PEG - Get Report), you know that you're about to look at a boring business. But as a dividend investor, that's actually a good thing.
PEG is an energy company that owns a regulated utility as well as a merchant power generation arm and an energy investment business. For investors in search of stable high yields, it's hard to go wrong with a power utility.
Like other regulated utilities, PEG boasts legal monopoly status in its New Jersey operating region. Even though wholesale merchant energy sales in other parts of the Northeast add an uncertainty factor to a large part of the firm's operations, investors benefit from a healthy balance between consistent income generation and commodity price-driven growth potential.
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On the utility side, PEG's footprint in New Jersey is particularly attractive given the state's high demand for power.
From a financial standpoint, it's important to remember that the power business is extremely capital-intense. To counter that, the firm has paid down debt in recent years and, as of last quarter, built up a more meaningful cash balance at the top of its balance sheet. That should help give Wall Street some assurance over PEG's dividend, which saw a 3.65% increase on Tuesday. The move brings the firm's yield to a hefty 4.7%.
Investors looking for power utility exposure should consider PEG a good core income holding.