Four Top Income Stocks to Buy Now
This market isn't showing many encouraging signs, so it's important to find companies that have good news in their earnings.
A wave of new environmental regulation has been heaped on utilities. Seven major rules governing the industry have been proposed for the next six years.
A massive amount of capital expenditure will be required to bring existing systems in line with the new regulations. Rather than spend the money, many companies are shutting down their dirtiest operations.
Size gives utility companies flexibility. A small company may be forced into expensive upgrades to stay in business because it relies on too many dirty plants. Larger companies can more easily adjust.
Once its merger with Progress Energy is complete, Duke Energy (DUK) will be the largest utility in the United States. Increased scale will allow Duke to make the upgrades it needs with greater flexibility. After the merger, Duke will serve seven million customers across six states. The combined company will also have the nation's largest generating capacity, 57.2GW.
Today, Duke yields 4.4%. With 85% of its post-merger operating earnings from regulated operations, Duke has a stable income stream with which to pay future dividends. My price chart shows Duke's strong breakout above its post-recession high of $22.06/share. Buy.
Union Pacific (UNP)
In 1968, legendary blues man Taj Mahal recorded "She Caught the Katy," about a woman who left him by hopping on the Katy, a nickname for the Missouri-Kansas-and-Texas railroad.
The Katy's rails were the first laid by the Union Pacific Railway Southern Branch back in 1865. Today, those lines make up a key corridor for Union Pacific, which owns 31,900 route miles and 8,200 locomotives.
Union Pacific is the nation's largest chemical transporter, and one of its largest intermodal carriers. My relative strength chart shows UNP's strong outperformance compared with the market for the last five years. Buy.
United Technologies (UTX)
This is a contrarian pick. United Technologies has been hammered lately, with Fitch downgrading United Technologies' debt to A from A+ on May 22. I see this as a buying opportunity for United Technologies, which now yields 2.7% and owns a bullpen of strong businesses that include Otis, Sikorsky, Pratt & Whitney, and Carrier, just to name a few.
United Technologies shares have taken a hard fall. Buy them while they are cheap.
Coca-Cola Company (KO)
Some brands are so strong that, in a twist, companies must prove their own commitment to the brand.
On March 9, the Coca-Cola Company was forced to put out a press release explaining why it had asked some of its suppliers to slightly alter their production of caramel coloring. Customers thought the company was changing the Secret Formula, and they became incensed.
Coke was simply avoiding a new labeling law from California, not changing its soda recipe. But the incident illustrates how invested consumers are in the brand. They actively police it. That's true brand loyalty.
Are those consumers going to buy RC Cola or Sam's Choice? Doubtful. That's the power of branding. Over the last five years, Coca-Cola has developed a strong trend compared with the market. Today, Coca-Cola yields 2.8%. Buy.[Editor's Note: Coca-Cola will split 201 on August 10 and is one of 11 stocks that have or will split in 2012.]
Editor's Note: This article was written by Richard Young of Intelligence Report.
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