2 Top Defensive Dividend Stocks

With many market observers wondering how long the summer/fall rally will last, we went looking for dividend paying stocks that outperformed the market during the spring pullback AND have also participated in this rally. Not surprisingly, we came up with 2 Utilities stocks, American Electric Power, (AEP), and Next Era Energy, (NEE). Next Era, based in Florida, was formerly known as FPL, (Florida Power & Light).

Both of these stocks are listed in the Utilities section of our High Dividend Stocks By Sector Tables.

Here’s how these 2 electric utilities stocks have performed as of 10/11/12, in both up and down markets. NEE did the best during the pullback, actually rising 4.69%, while AEP only fell -1.18%, while the S&P fell nearly 10%. AEP has reversed itself during the rally, rising over 14%, while NEE has risen 7.57% to date. As the table below shows, they both have risen double-digits on a Pullback vs. Rally net basis, while the S&P has risen just over 2% during the 2 periods:

Dividends: Both stocks pay quarterly dividends, and have increased them over the past 5 years. AEP’s dividend has grown from $.41 in 2007 to the current $.47 quarterly rate, while NEE has done much better, climbing from $.41 all the way up to $.60, a nearly 33% dividend growth rate:

Earnings Growth: As with most Utilities stocks, these aren’t big growth stories, since much of their earnings is regulated, but both firms are at least showing some growth for the past and future, although NEE’s EPS stumbled -3.14% in 2011:

Financials: Both firms have superior Management Efficiency Ratios and Operating Margins vs. their industry. They both carry a higher debt load than the Industry average, but they also have higher Interest Coverage Ratios:

Disclosure: Author held no AEP or NEE shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.