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JimVanMeerten (56.42)

XCEL might be a sure thing



May 19, 2011 – Comments (0) | RELATED TICKERS: XEL

I was screening on Barchart for an electric utility with great price momentum and came across XCEL Energy (XEL).  When I say a sure thing I mean that the company is rated 100 for both price stability and earning predictability so what you see is what you get with a minimum of surprises.  The company has already received a 20 year licence on one of its plants and is soon expected to receive another one on another.  They also have been granted new price increases in several other jurisdictions.  I like the utility on its price momentum alone.

Xcel Energy Inc. (XEL) is predominantly an operating public utility engaged in the generation, transmission and distribution of electricity and the transportation, storage and distribution of natural gas. The company generates electricity using coal, nuclear, hydro, wind, and solar energy. It also purchases, transports, distributes, and sells natural gas to retail customers, as well as transports customer-owned natural gas. Xcel Energy primarily serves customers in the areas of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas, and Wisconsin. 

Factors to consider:

Technical Factors:

1 - 96% Barchart technical buy signal

2 - Trend Spotter buy signal

3 - Above its 20, 50 and 100 day moving averages

4 - 14 new highs and up 5.62% in the last month

5 - Relative Strength Index 72.08% and rising

6 - Trades around 25.20 with a 50 day moving average of 24.05

Fundamental Factors:

1 - Wall Street brokerage analysts have published 3 strong buy and 10 hold recommendations for their income clients

2 - Sales are projected to increase by 3.40% this year and another 3.30% next year

3 - Earnings are expected to increase by 6.20% this year, 5.80% next year and 5.44% annually for the next 5 years due mainly to the price increase already granted

4 - The 4.30% dividend is only 57% of net earnings so it should be secure

General Investor Sentiment:

1 - Interest on Motley Fool is high for a utility with 454 readers expressing an opinion on this stock

2 - CAPS members vote 311 to 30 that the stock will beat the market

3 - The More experienced All Stars agree with a 106 to 7 vote

Summary:  For income investors looking for an electric utility with growth prospects, price increases that are already approved and a 4.30% dividend that is only 57% of earnings XCEL Energy (XEL) should be a buy.  I look for a total annual return in neighborhood of 5.50% for the next 5 years.

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