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Markets that rise are always followed by markets that fall. It’s the typical bull/bear cycle that investors face.
Right now the market is near all-time highs, which is why I’m happy to own some boring emergency stocks. One of my favorites is nut Black Hills (NYSE: BKH). Here’s why I own these high-yield stocks and why you might want to buy them too.
What does Black Hills do?
Immediately market capitalization At just $4 billion, Black Hills is not a particularly large utility. In fact, it is overshadowed by the industry giant NextEra Energy (NYSE: NO)with a market capitalization of $160 billion. Compared to that, Black Hills is just a rounding error! Yet it still provides a necessity of modern life.
The company has approximately 1.3 million natural gas and electric customers in parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. Without the energy Black Hills provides, these customers would be operating in the dark ages.
The company is regulated, so the rates and investment plans must be approved by the government. However, being regulated also means that it has a monopoly in the regions it serves. Those 1.3 million customers have nowhere else to go for their energy needs.
Black Hills is a bit of a tortoise in terms of the business, but with the market near record highs, I’m glad to have a few reliable tortoises in my portfolio. However, due to its small size, many investors have never heard of Black Hills. This is a shame, because it has handily outperformed the industry giants on one key criterion: dividends.
Black Hills is a dividend king
NextEra Energy, which most investors have heard of, has increased its dividend annually for 30 years. That’s a very impressive streak, but it pales in comparison to the 54 consecutive years of annual dividend increases that Black Hills has accrued. It has one of the longest dividend streaks in the utility sector, making it a very elite Dividend King.
Think about the past five decades: the list of bad times includes the pandemic, the Great Recession, the dot.com bust/recession, Black Monday, and the raging inflation and oil crisis of the 1970s.
And that’s just the highlight reel. There were smaller ups and downs on Wall Street and also in the economy. Through it all, Black Hills continued to reward investors with annual dividend increases. That’s the kind of consistency I want in my income portfolio when the market is hovering at lofty levels.
But there’s more to it than just the dividend. For example, Black Hills’ customer base is growing nearly three times faster than the broader U.S. population. That should support solid growth as the utility invests to serve that growing customer base.
To put some numbers on that, the five-year capital investment plan is $4.3 billion, which management expects to translate into earnings growth of between 4% and 6% per year.
The dividend will likely keep pace with earnings growth, meaning around 5% dividend growth is the target. That’s a solid number for a utility and also happens to be the annual dividend growth rate Black Hills has achieved over the past decade. So basically, it expects to continue doing what it’s been doing for years: providing customers with reliable power, and investors with reliable dividend growth.
Black Hills is a boring and reliable dividend stock
I’m not going to brag about owning Black Hills to anyone; it’s not that kind of stock. It is a fundamental investment that I can own in good times and bad, knowing that its essential service will always be in demand. Along the way, I can collect a lofty 4.5% dividend yield, one of the highest in the utility sector, supported by a growing dividend (for reference, NextEra’s yield is only about 2.6%).
If Wall Street hits the ceiling and there’s a bear market, I won’t lose any sleep owning Black Hills. If you’re a conservative dividend investor, that probably sounds attractive to you, too.
Should You Invest $1,000 in Black Hills Now?
Consider the following before buying Black Hills stock:
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Ruben Gregg Brouwer has positions in Black Hills, Dominion Energy and Southern Company. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Dominion Energy and Duke Energy. The Motley Fool has one disclosure policy.
Is the stock market going to crash? Don’t know. That’s why I own these high-yield stocks. was originally published by The Motley Fool