Invest in the Optimal High-Profit Functional Shares with a $1,000 Budget Instantly
Invest in the Optimal High-Profit Functional Shares with a $1,000 Budget Instantly
Certain entities in the financial sector are extensively known due to their substantial impact and size, such as NextEra Energy (NEE shedding -0.74%) or Southern Company (SO enhancing 0.07%). However, there's a lesser-known entity, Black Hills (BKH decreasing -0.40%), that only a few acknowledge. Sadly, as it's less recognized, it misses out on the attention it deserves. However, Black Hills boasts a commendable dividend yield and an impressive dividend history, surpassing both NextEra and Southern.
Discover why Black Hills stock could be the best destination to invest $1,000 (or more) at this moment, even following the notable advancement in the utility sector.
What does Black Hills entail?
From a broader viewpoint, Black Hills is a fairly uninteresting regulated utility business. It delivers natural gas and electricity to around 1.3 million customers in various parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Just as you'd expect, it provides energy to its customers reliably and consistently. Unlike NextEra, it doesn't have a side business in building renewable energy, and unlike Southern, it isn't engaged in massive capital investments like the recent completion of nuclear power plants. Instead, Black Hills focuses on doing the basics quite well. Undoubtedly, this is one reason why it remains a forgotten entity on Wall Street.
There's also the matter of scale. The consumer base isn't sizeable, nor is Black Hills' market cap. At merely $4.5 billion, it's a negligible factor compared to the colossus NextEra, which boasts a market cap of over $150 billion. Even Southern is significantly larger with its $95 billion market cap. However, it's not a requirement for a company to be large to be successful. Being a small, reliable, regulated utility is not a bad thing.
It's worth noting that Black Hills operates in relatively appealing regions. Management consistently emphasizes that the company's customer growth is expanding approximately three times faster than the United States' population. More customers inevitably result in more revenue and more need for the types of capital investments that regulators are inclined to approve. In short, there's a long-term growth driver supporting Black Hills' business.
Why dividend investors will find Black Hills captivating
If you're drawn to stocks with swiftly growing businesses, you probably won't adore Black Hills. It is more of a slow and steady tortoise. Dividend investors, on the other hand, will likely appreciate it. Black Hills belongs to the prestigious group of companies known as Dividend Kings, which have boosted their dividends every year for 50 or more years. Black Hills' streak currently stands at 54 years and counting. Neither NextEra nor Southern can match this achievement.
To be fair, Black Hills' dividend growth rate has averaged around 5% annually over the last decade. NextEra's dividend growth rate is significantly higher at 10%. Yet, 5% is more than enough to offset inflation's erosive effects and augment the buying power of the dividend over time. It's worth noting that more recent dividend increases have been lower than 5% as Black Hills focuses on strengthening its financial position. However, the long-term earnings growth target for the company is between 4% to 6%, which should correspond with the dividend's growth rate over the long term, as well.
The genuinely thrilling aspect of the story, however, is Black Hills' dividend yield. Currently, it hovers around 4.1%, significantly surpassing the 2.8% yield from NextEra or the 3.2% from Southern. It also exceeds the 2.8% yield provided by the Utilities Select Sector SPDR ETF (XLU shedding -0.53%) as a sector proxy or the 1.2% yield delivered by the S&P 500 index. Moreover, it sits near the high end of Black Hills' historical yield range.
Black Hills' focus on delivering reliable energy services and its ability to maintain a dividend yield and history that surpasses both NextEra and Southern, despite being a smaller entity, makes it an attractive option for dividend investors. This is particularly appealing as the company's yield of 4.1% significantly outperforms the yields of its competitors and the Utilities Select Sector SPDR ETF.
Furthermore, the company's consistent customer growth, expansion in appealing regions, and long-term growth driver support its sustainable dividend payouts, making it an attractive investment choice for those seeking consistent income returns, even if the growth rate is not as rapid as some other stocks.