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This story was sent to you by vkaminski@aol.com with these comments:
From CBS.MarketWatch.com, online at:http://aolpf5.marketwatch.com/news/stor= y.asp?siteID=3Daolpf&guid=3D{2B94A9E8-D298-4858-AB83-E8367AED9C8F}=20 =09 Avoiding the shock in utility stocks =09 =09 By Myra P. Saefong, CBS.MarketWatch.com 1:00 AM ET May 31, 2001 Newswa= tch More Headlines =09 =09 =09 SAN FRANCISCO (CBS.MW) -- Fund manager Greg Phelps has just the right weapo= n to stave off the short circuit in utility stocks: an investment strategy = that helps him see the future. When choosing utility stocks for the $225 m= illion John Hancock Patriot Select Dividend Trust [DIV ], Phelps takes a lo= ok at three key issues: dividend yield and sustainability, management and r= egulatory environment. His strategy has helped the 11-year old, closed-end= fund see a net asset value return of 17.21 percent year-to-date and 4.51 p= ercent on a 3-year annualized basis, according to Lipper. The Philadelphia = Utility Index [$UTY ] has risen about 20 percent over the past year. Phelp= s' investment preferences have also kept him away from investing in Califor= nia's cash-starved utilities, Edison International [EIX ] and PG&E Corp. [P= CG ]. It's been years since the Select Dividend Trust Fund has been expose= d to any California utility, Phelps said. "I never felt comfortable with = the regulatory environment in California," he said, emphasizing his nervous= ness over the fact that Edison and PG&E agreed to have their rates capped a= nd could not pass on the higher cost of electricity to their customers. P= helps believes Florida provides a good regulatory environment for utilities= because its high temperatures and above average population growth means it= will have to build out its electric utility infrastructure and transmissio= n distribution system and create new generating capacity. Since electrici= ty is such an integral part of the state's economy, Florida has typically t= reated its utilities very well, he said, giving them reasonable allowed ret= urn on equity and the ability to pass through costs. Using this outlook on= the electric industry, Phelps believes Alliant Energy Corp. [LNT ] is a gr= eat pick. It has an attractive dividend yield. It's also in a favorable reg= ulatory environment mostly in Wisconsin and Iowa and is a probable consolid= ation candidate. The stock closed Wednesday at $30.15, off one penny. Phel= ps' second pick would be TECO Energy [TE ] because it has a "great track re= cord" of increasing its dividends -- at least 10-straight years -- and its = located in Florida. It also has a profitable and growing coal mining and tr= ansportation operation as a unregulated subsidiary, he added, noting that c= oal is a big part of President Bush's energy plan. Shares of the company cl= osed at $31.73, up 15 cents on Wednesday. Finally, Kansas City Power and L= ight [KLT ] boasts a higher-than-average dividend yield, much like Alliant = Energy. It's also located very close to where Warren Buffet's main utility = operations are so it could potentially be on his "shopping list." The compa= ny has earnings growth potential with its new generating plants coming on l= ine for this summer. Phelps also likes the company's move to build out its = fiber optic subsidiary. On Wednesday, shares closed at $25.09, up 14 cents.= Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco. = =09 =09
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