The utilities we mentioned in our 2014 stock picks article were:

• Southern Company SO
• Duke Energy Corp DUK
• Dominion Resource D
• American Electric AEP
• Cleco Corporation CNL
• Entergy Corporation ETR
• NextEra Energy, Inc. NEE
• NRG Energy Inc NRG
• SCANA Corporation SCG
• TECO Energy, Inc. TE
• Xcel Energy Inc XEL

There are lots of dividend stocks and lots of dividend reinvestment plans. As part of your stock portfolio consider holding conservative stocks that will continue to pay dividends in good and bad economies. Consider dividend reinvestment plans in order to profit from exponential growth of your investments.

Screening for Dividend Stocks

A quick and handy tool for stock screen is the Yahoo Finance Stock Screener. You can use this tool to screen stocks by sector, price, dividends and more. As a conservative example we choose stocks with a market cap of $10 Billion or more and a dividend yield of 3% or higher. We found Duke Energy Corp, which is in our list of utilities. The company has a market cap of $50.44 Billion and pays a 4.4% dividend. We googled Duke Energy Dividend Reinvestment Plan and found out that for their DRiP you do not pay purchase fees or reinvestment fees and that purchases are made every month. The stock screen in which we found Duke Energy contains

• ConocoPhillips (80.28B, 4.2%)
• Cisco Systems (119.43B, 3.4%)
• Dow Chemical Company (55.59B, 3.2%)
• Chevron Corporation (218.24B, 3.5%)
• Dominion Resources (41.34B, 3.4%)

Note that Dominion is in our list of utilities.

High Dividends Versus Staying Power

The companies listed in the screening section are been around for years and are not going away. This is the point of buying dividend stocks and using dividend reinvestment plans. There are higher paying dividend stocks but sometimes the company is paying out huge dividends to disguise an intrinsic weakness in their company. If we apply the same requirement of a $10 Billion market cap but look for a dividend yield of over ten percent the screen gives us two stocks, Annaly Capital Management and Seadrill Limited. Annaly used to sell for $19 a share through most of the last decade and fell by half this last year. Think of it as a 5% dividend stock whose price fell by half and whose dividend could be reduced as well. When we screen for Seadrill we see an investment article that notes that Seadrill will only be able to sustain its dividend if the current weakness in the oil drilling market improves.

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The Southern Company – and Other Utilities

The Southern Company started 2004 with a valuation of $33 a share. It has paid 41 dividends in the last ten years and currently has a dividend yield of just less than 5%. Its quarterly dividend has crept up from 35 cents a share a decade ago to 50 cents share today. A threat to the value of this stock is the prevailing interest rate. When the Fed started talking about reducing the quantitative easing stimulus program in May of 2013 interest rates went up a bit and the value of the Southern Company fell from its peak of $48 to its current value of $40 a share. As the Fed backs off of its stimulus program we can expect to see interest rates go up farther and we can expect to see the price of Southern Company stock fall farther. However, the dividend that this utility pays comes from a very stable business that will not suffer unduly if the Fed backs off its stimulus program as the economy improves. If the stock falls another $10 a share it will be paying a dividend of more than 6%. Our belief is that The Southern Company belongs in your list of possible stock picks for 2014, once interest rates rise and the market falters.

Here are a few more utilities to consider:

Other factors to consider when including utilities in your stock picks for 2014 are that these are largely recession proof stocks. If things go bad in China, people in the USA still need electricity for their homes. Energy costs have gone down with the advent of sustainable fracking technology which fact benefits all utilities.

What Constitutes a Vulnerable Stock?

Your stock picks for 2014 should not include vulnerable stocks. A time honored way to pick stocks is to look a recent profits and quality of management. A contrarian view is to look at the strength of a brand name. For example, Coca Cola can make a lot of mistakes and even have a bad quarter and the entire world still recognizes and wants a Coke. Microsoft is not growing rapidly but it is an institution that is largely recession proof. On the other hand Apple is riding a wave of success and needs to pull a magic rabbit out of the hat every year to stay on top. Consider these thoughts when choosing Coca Cola – KO, Apple – APPL or Microsoft – MSFT for your stock picks of 2014. And, by the way, there is nothing wrong with investing in beer or other things that people consume during both good and bad times!

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