Travis Miller: With the rise in interest rates in the last couple of months, the utilities sector is now open for stock-pickers. There are several utilities trading at 20% discounts, but all of them face challenges. We now think on the high-quality side there are three that offer good value for investors, especially those looking for dividends.
One of those is Dominion Energy. It trades at a 15% discount to our fair value estimate and a 4.5% yield. With good growth we think this is an attractive total return, especially with interest rates still low.
Another high-quality name we think that is trading at a discount is Duke Energy. It trades at a 10% discount and a 4.5% yield. It's going to have slower growth but still a good total return for investors.
And finally, Southern Company. It's trading at a 5% yield and a 10% discount to our fair value estimate. It faces some uncertainties related to a new nuclear program, but we think it will resolve those and ultimately give investors a solid total return.