The American utility industry is characterized by necessity and debt. The following three companies seem cheap in this capital intense industry.
Exelon Corporation (EXC) is an 18-year-old, $36 billion utility services company. It earned approximately $4 billion on $34 billion of revenue. It has cash of about $900 million with total debt of $85 billion. It yields 3.71%. Exelon is the largest utility company in the U.S. It was formed by merging PECO Energy Company (circa. 1881) and Unicorn Corp. (circa. 1994) in 2000.
Consolidated Edison (ED) is a 195-year-old, $24 billion utility company. It earned about $1.5 billion on $12 billion of revenue. It has cash of about $800 million with total debt of about $33 billion. It yields 3.78%. Consolidated Edison is one of the oldest companies on the exchange. It also has a certain reputation towards accidents and incidents that have occurred under its holdings throughout history.
PG&E Corporation (PCG) is a 113-year-old, $20 billion utility company. It earned $1.6 billion on $17 billion of revenue. It has cash of about $500 million and total debt of $49 billion. It used to have a yield but cut the dividend for 2018 due to costs associated with the California fires last year. PG&E operates primarily on the pacific coast of the country. It also has been through bankruptcy in 2001.
Given the state of affairs, the utility industry in America isn’t capitalized very well. These companies do generate cash, but it is eaten up by the maintainenance of fixed capital assets. However, these companies need to be operating because the electric utility infrastructure needs to be maintained – you can’t shut the lights off. In the end, ConEd would be the best way to go. It yields a decent rate, continues to earn well and has been around for almost 200 years. It knows how to service its debt load in all financial environments.
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