Show I BUSINESS t I tiit I i i UTILITY DIVIDENDS Advancing costs expensive borrowing and lagging rate boosts have made utility stocks unpopular for some years as has been reflected in the weak stock prices for the group There is however good reason for acquiring selected utility Issues despite the somewhat bleak prospects for substantial term near appreciation in price For Investors whose portfolios portfolios port port- folios may need Income and some protection against Inflation Inflation In In- Elation many utility issues of respectable quality offer sizable dividend yields some of which are even double-digit double And a return of eight to nine percent is not to be sneezed at So a careful look at at these stocks reveals facets seeming to justify investment in what at first glance might seem high high- risk situations Dividend Support There has been considerable doubt over the past few years as asto asto asto to the safety and continuity of electric utility dividends The worst came when Consolidated Edison of New York actually omitted payment of a dividend in June 1974 1979 Many financial observers felt that this would b be followed by a blizzard of other utility dividend omissions or reductions This did not take fake place and in fact many electric companies have continued annual dividend increases which have long been traditional for much of the industry Another significant factor tied to dividend safety is to what degree fixed charges charges' and preferred dividends dividends' are covered by earnings Obviously Ob Oh- the common stock payout could be in se serious ious trouble if earnings are are insufficient insufficient in in- sufficient to service senior obligations Note too that earnings should be looked into to see if if they actually represent operating results or if t ey have t d by i in of recurring non credits credits' prat adjustments in In bookkeeping derived Accounting-derived inc income m items are often included in the earnings picture to present a figure that will generate enough interest bond coverage to lure investors to new bond issues at reasonable interest rates Another Earnings Factor There is another non- non operating financial item resulting in apparent higher earnings This is the Credit for Funds Used During Construction Construction Con Con- a complex computation computation com com- which assumes an income credit for facilities under construction but not yet productive Naturally the credit will vary in relation to the building going on at any given time But with utility construction activity becoming more of a continuous process although slowing some of late this credit could become a fairly constant factor in reported earnings Aiding The Utilities While at the present time the appeal of most electric utilities issues is largely in the dividend there are a number of proposals in the wings which could improve the outlook for this group and eventually restore investor confidence One plan calls for a permanent investment tax credit of 12 percent a change in work-in- work progress accounting and an altered rate base Especially important from r the point of view of capital tf r. financing is a suggestion to 4 extend the time on pollution control requirements Another proposition is to set up a quasi quasi- public corporation to provide financial assistance for promising projects and utilities suffering financial troubles Buying Dilations 1 f While capital appreciation for this stock market group may maywell maywell maywell well be a longer term longer term matter mutter t i recovery of depressed utilities x I when when it comes could result I t tin in a more rewarding net return than even the substantial yields that are now available Two high yielding utility stocks currently favored by the Research Department of Reports are Duquesne Ii Light and Southern Company Those interested in re receiving a afree afree l free detailed t report on either or c both oth of these companies may write to Baboons Baboon's oJ i Wellesley Hills lillis Mass |