re regulatory environment.. I think that a highly regulated utility is actually better for our purposes than one which has been deregulated and is whipped back and forth by fuel costs, competitive forces etc etc. I can assure you that HE is VERY tightly regulated and very well connected to the political process. While there are the normal annoyances and minor lawsuits, HE is a necessary part of Hawaiian infrastructure and guaranteed a stable profit margin. The earnings suprise last quarter was mainly related to health and benefits costs, which are exploding everywhere. They too will soon be passed on to ratepayers.
I believe that refinancing of debt and calling in 8% preferred is in the works and will provide an UPSIDE boost to eps.That is one of the things I liked about ede.. It is refinancing already. Its such a no brainer for the companies and will materially impact cash flow as well as earnings.
Run the dividend coverage screen.. set dividends to min 5% max 7% . set p/e at max 15 (covers 6.66% dividend) you will only find 40 companies in that universe.
Throw out the obvious bad choices and you are really down to a very small group. It is my belief that the yield in this group will contract through PRICE appreciation (as opposed to dividend cuts) to some rational relationship to peers who are paying about 3.5% now. Likewise, there is a relationship between tax advantaged dividends and govt bonds that is also out of whack on HE, EDE, and MO (i know) .. I believe that a 30++ percent price adjustent is in the near future as others do the analysis that you and I obviously did. Ebitda and free cash flow coverage is also very stable. Anyway, I am taking a hard look at gxp.. GM also worth looking at but only if you believe real strongly in a full on recovery.