COMPANY DESCRIPTION

Alliant Energy is a public utility holding company. As of Dec 31 2013, Co. provided regulated electricity and natural gas service to approximately 1.0 million electric and approximately 418,000 natural gas customers in the Midwest. The primary subsidiaries of Co. are: Interstate Power and Light Company and Wisconsin Power and Light Company, which are public utilities engaged principally in the generation and distribution of electricity and the distribution and transportation of natural gas; Alliant Energy Resources, LLC, which manages a portfolio of subsidiaries and investments; and Alliant Energy Corporate Services, Inc., which provides administrative services to Co. and its subsidiaries. 

 

ECONOMIC MOAT

Alliant Energy’s moat comes from its monopolistic position as a regulated utility. State and federal regulators typically grant regulated utilities exclusive rights to charge customers rates that allow the utilities to earn a fair return on and return of the capital they invest to build, operate, and maintain their distribution networks.

 

OUTLOOK

Alliant Energy is investing heavily in infrastructure. The Madison, Wisconsin-based utility deployed roughly $1 billion in capital expenditures last year.  Alliant should benefit from the certainty of several rate settlements that it achieved during the past year for its retail division. For 2016, we think the company will try for further rate increases. The board of directors has raised the dividend. The quarterly distribution was increased $0.04 a share (8%), and the annualized payout is now $2.20. The company is targeting a payout ratio of 60%-70%. These shares may appeal to some income-oriented investors. The dividend is well supported by Alliant's predictable cash flows, and the yield is decent.

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STRENGTHS

  • Strong transmission and distribution infrastructure

  • Strong gas supply agreements 

WEAKNESSES

  • Limited operational presence

  • Coal-fired generation assets

  • Dependence on subsidiaries to pay dividends 

     

THREATS

  • Competition Weather conditions

  • Developmental risk 

OPPORTUNITIES

  • Acquisition of Riverside Energy Center

  • Strategic divestiture 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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