SOURCE: Rothman Research

Rothman Research

April 13, 2010 08:45 ET

Utilities in 2010

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 13, 2010) - - As the brunt of a global recession slowly recede leaving blemishes and weakness in core economic fundamentals, the utilities sector, together with all other sectors in the United States, are cautiously thinking through the aftermath, studying the magnitude of the economic recovery. Pressing questions on demand outlook plague the sector as previous figures indicate a declining trend with a slump of 0.8% in 2008 followed by a decline of 4.2% in 2009. And to make outlook even bleaker, demand estimates for 2010 and 2011 made during the first quarter by most companies are in the red. However, one of the great positive in this sector is that earnings growth and dividend yield is quite an attractive prospect, with an average dividend yield of 4%. Recently, NiSource Inc. (NYSE: NI) announced a quarterly dividend of $0.23 per share, whilst Avista Corp. (NYSE: AVA) reported a surge of 26% for its fourth quarter earnings.

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"One of the greatest challenges throughout the recession years for utilities companies has been their failure to increase gas and electricity rates as they faced a frugal propensity from their largest clients when it came to power usage," stated Jack Benassi of "A few exception defied the overall trend such as Avista."

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In 2010, if economic recovery remains constant, the chances of seeing a boost in industrial power demand could be high. If this does happen, the utilities sector would find itself in greener territory... But at this point, it is a big 'if' as recovery is still taking its time and the recession is still far from beaten.

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