Tags: TECO | Energy | yield | TE

TECO Energy: Power Provider with a Solid Yield

By    |   Thursday, 17 May 2012 02:51 PM

TECO Energy (TE) is a medium-sized power provider in Florida offering a 5 percent yield. Its stock price over the years has been flat, typical of an income stock. Purchased at a safe entry point, however, TECO could become a solid portfolio anchor.

TECO Energy is the parent company of Tampa Electric Company, a Florida corporation with two business segments, Tampa Electric and Peoples Gas System. Tampa Electric provides retail electric service to more than 678,000 customers in West Central Florida with a net winter system generating capability of 4,684 megawatts (MW).

Peoples Gas System (PGS) is engaged in the purchase, distribution and sale of natural gas for residential, commercial, industrial and electric power generation customers in Florida. With more than 340,000 customers, PGS has operations in Florida’s major metropolitan areas.

TECO Coal Corporation in Kentucky has 11 subsidiaries and is located in eastern Kentucky, Tennessee and Virginia. These entities own interests in coal processing and loading facilities, mineral rights, own or operate surface and underground mines and own interests in coal processing and loading facilities.

TECO Guatemala, a Florida corporation, owns subsidiaries that participate in two contracted Guatemalan power plants, San José and Alborada.

“TECO Energy is maintaining its 2012 earnings per share guidance range between $1.30 and $1.40, excluding charges and gains,” management said in a recent filing.

“Tampa Electric and Peoples Gas expect to earn within their respective allowed return ranges from customer growth in line with the trends experienced in 2011, and a continued focus on cost management. The guidance assumes normal weather for the remainder of the year for both utilities.”

TECO Energy has a market cap of $3.77 billion in a sector, multi-line utilities, where the average company size is $4.6 billion. Its trailing 12-month P/E ratio is 13.88 and its five-year projected price-to-earnings-growth (PEG) ratio is 3.37.

Its projected earnings per share growth for the coming year is 4.48 percent, compared to a sector average of 4.02 percent.

Investor shift

Analysts are bullish on TECO, with buy or outperform ratings from Columbine Capital, GMI, EVA Dimensions, Thomas White International and Market Edge.

Standard & Poor’s rates the company neutral.

“Despite an expected increase in earnings at the utilities due to an assumed return to normal weather and customer growth of about 1 percent, we believe the shares have been restricted this year by an investor shift away from the utilities sector, and by lower projected margins at TECO Coal due to higher production costs,” S&P analysts wrote in mid-March.

TECO Energy next reports on May 1, 2013.

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