Tuesday, February 22, 2011

PPL Corp Dividend Analysis

Today on my agenda is PPL Corporation (PPL), a Utility Company based in Pennsylvania and also is involved internationally.  One reason why I like the Utility Industry is that we always will be using some sort of energy to carry out our daily activities, I mean what is going to brew that coffee as you are reading my blog!?

To begin - P/E Ratio: Price currently as of market close is $25.02 and their earnings are $2.23 per share, according to my pals at Google Finance.  This equates out to a: $25.02/2.23 = 11.22, well under the S&P 500 average.  This tells me that this utility company may be undervalued.  Morning star.com has shown that the industry average P/E is 11.1.  Therefore, they are right on with the industry.  There may be other companies that are more undervalued than others, which would need more analysis.

Appreciation from current price: Their 52 week high is $30.05.  Therefore, based on that historical fact and with them trading at $25.02, there is ((30.05-25.02)/25.02) = 20.1% appreciation possibility with the stock.

Dividend Yield & Payout Ratio:  Their dividend payout per year currently stands at (0.35*4) $1.40 annually per share.  $1.40/$25.02 = 5.60%.  This yield is very attractive and offers a great DRIP opportunity.  Most utility companies do offer a generous yield, and this one doesn't stray to far from the tree.  The payout ratio breaks down to 1.4/2.23 = another 63%er.  This isn't too alarming, just out of my 60% range.  Most utility companies pass on most of their earnings down to their investors, therefore this doesn't "turn me off" in the least bit, and they have been doing so for over 25 years.

Conclusion: If you don't own a utility company in your portfolio, this could be a great company to look at.  With usage of energy always being there and also an international protection, this could be a long-term stock one would hold.  They offer a great dividend yield and I believe they have room for appreciation.  Again, consult your own analysis and advisers to see if it fits your strategy.

-Lanny B.

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.

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