The Simpsons' Mr. Burns is one heck of a boring old fellow, and that's often the stereotype for nuclear power on the whole - old dudes, old money, really boring.
Forget Burns; think Trump.
There are a few nuclear-related wild cards that could be about to make waves in the market. Funny thing though, they don't seem to make headlines. Now it's time to give them their due.
Rotating Everything Into Thrift
Once upon a time real estate investment trusts (REITs) used to be about income. Back in the day, investors sought out REITs to find asset-backed yields greater than Treasuries. Somewhere though, the game changed, and REIT share prices kept moving upward. Now, some don't even yield as much as the 10-year Treasury.
Examples:
• Simon Property Group (NYSE: SPG) yields a mere 3.7%.
• Voranado Reality Trust (NYSE: VNO) presents income investors a ho-hum 3.7% dividend yield.
• Top-end yielder, Annaly Capital Management (NYSE: NLY) touts 6.2%, but since it is a mortgage REIT, it possess a measure of credit risk, unlike the 10-year, which is presently yielding around 4.00%.
To learn more about REITs, check out What Are REITs? and The REIT Way.
The Nuclear Income Paradigm
While some REITs may now be yielding less than the 10-year Treasury, there's another income paradigm shaping up in the market: big nuclear players.
Take Southern Co. (NYSE:SO), for example, which yields 4.2% at the current share price of around $38. The company has more than 2 million residential, commercial, and industrial customers. What we're talking about is a large utility play that supplies 20% of Georgia and Alabama's energy needs through nuclear. Larger utility companies like Southern are usually slower, more stable investments, which generally bring investors steady income over long periods. It's important to note that Southern should be approached with caution right now, as the stock is trading near a 52-week high, thus, profit-taking due to the recent torrid run could instigate a pullback in the stock. However, if the stock were to fall, it could be a great candidate for investors seeking dividends over the long haul.
Another large utility play with a hand in nuclear is Xcel Energy (NYSE:XEL), which serves 3.3 million customers through gas, coal , hydro and two nuclear plants. The stock is presently trading for around $22 per share with a 4.1% dividend yield. At current prices, the stock is attractive, trading 1.5-times book and 0.9-times sales. Xcel hasn't run up quite as much as Southern, which may be a positive for investors wising to take positions now. (To learn more on these ratios, see these tutorials: Investment Valuation Ratios: Price/Book Value Ratio and Price/Sales Ratio.)
Bottom Line
Of course, the entire energy sector isn't without risk, but for those seeking steady dividends returning something similar to the 10-Year Treasury, the two plays mentioned here are certainly worth considering.
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