Dealmaker’s Diary: Shining a Light on a High-Wattage Dividend Payer

Alpesh Patel|July 25, 2024

Location, location, location.

That’s not just a tenet of real estate.

If you’ve been following along… you know that I like to find companies that are well-diversified both in what they do and where they do it.

But this week… I’m flipping the script.

I’ve found a dividend-paying utility company that is concentrated in the Pacific Northwest… which means it’s insulated from global dynamics.

The stock has low volatility and is about 20% undervalued. Good.

But what I like most is the stock’s momentum. It’s trending in the right direction… and is on a path to revisit the previous highs.

Give your portfolio a jolt of energy with this week’s high-voltage opportunity… courtesy of my GVI strategy.

Get all the details on this power player – including its ticker – in my latest video.

Click on the image below to watch it.

TRANSCRIPT

Hi, friends. Stock of the week time… from vacation, if the background looks slightly unusual for you.

I’ve got Portland General Electric Company (POR).

I should say, even though I’m on vacation, the level of due diligence is undiminished. The sound might be slightly different. I’m not in office conditions. So forgive me if the audio is not Taylor Swift quality.

Portland General Electric Company is the one I’ve gone for. I’ve always wanted to visit Portland, by the way, but that’s not the reason for the selection.

They’ve got nearly a million customers across 51 cities in Oregon. Now you might think, well, that’s somewhat concentrated.

Actually, I looked at the financials.

And to some extent, you could say the company is somewhat protected from the global market. Of course, being a global company would mean it’s diversified. Here, we’ve got the exact opposite. It’s got some degree of insulation.

It’s a utility company with $4.7 billion in market capitalization. Again, it’s Oregon-based.

It pays a dividend, as you’d expect from utilities.

So let’s look at some of the numbers. On my Growth-Value-Income, rating, it shows a 9. Now, 7, 8, 9, or 10, I’m fine with. And this is a 9 out of 10. Fantastic.

Forecast P/E ratio is a multiple of 15.1. For a utility, it’s a little bit expensive, but I can live with that.

Now, cash return on capital invested (CROCI) tends not to be a useful number for something like a utility. (See why I like CROCI here.)

What I do like and is a useful number for a utility and why people often have a utility stock is its volatility, which is well below 20%.

Now, all of these numbers are not ideal based on what I usually examine for my GVI Investor research service. But for a Dealmaker’s Diary, they are more than adequate because we’re going to emphasize a bit more on the momentum.

You can see in the chart that the MACD is nicely rising in the right direction. That’s what I want to see.

So I’m very pleased with that direction of flow.

And would it be too ambitious to say it’s going to go to about $55? Well, that wouldn’t give us a great return, would it, if it just went to those highs…

What would give us a superior return is if it went to those higher figures around $65 from $46. That would be significantly better than January 2020 levels.

And it is indeed undervalued on a discount cash flow basis as well. So that gives us some other cause for optimism as well.

Thank you very much.