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U.S. utilities are in a rut and, according to recent energy projections, aren’t about to dig themselves out any time soon. But if you’re looking for a solid dividend with growth potential, you may find a match in U.S. utilities with international assets. I’ll highlight five utilities with different degrees of foreign forays and let you decide which fix fits your fancy.

America doesn’t want your energy
When Exelon CEO Chris Cane recently said “2012 was a difficult year on the economic front for our sector,” he wasn’t just making excuses for his company. Falling sales were a common trend for utilities last year, and the sector lagged the S&P 500 by more than 5 percentage points.

^SPXTR data by YCharts.

Looking ahead, projections aren’t peachy. A recent Department of Energy report predicts that electricity demand will clock in at 0.58% compound annual growth over the next decade, dulled by both America’s economy and advancements in energy efficiency.

The Federal Reserve announced last week that it expects U.S. GDP to fall between 2.9% and 3.7% by 2015, child’s play compared with many emerging markets. And although many utilities are overhauling their energy portfolios to set themselves up for a profitable future, some companies are looking abroad to propel top line growth.

Yes to AES?
When looking for utilities with international exposure, AES is the elephant in the room. Its 27-country spread offers formidable international exposure.

Source: AES Earnings Presentation (MCAC is Mexico, Central America, and the Caribbean. EMEA is Europe, Middle East, and Africa)

But diversification doesn’t make bad business good, and AES is currently working to cut costs. Its 4.9 debt-to-equity ratio is higher than 98% of its peers, and the company’s decision to sell 14 assets in nine countries over the past year is no coincidence. The utility’s stock jumped 6% on solid Q4 earnings, and BRIC bulls would do well to give AES a closer look.

Feeling Chile?
Hailing from my home state, North Carolina-based Duke Energy offers investors a nibble of internationalism with a big serving of Southern sauce. Its International Energy subsidiary is primarily focused on generation in Latin America, but it also owns a 25% stake in Saudi Arabian National Methanol Company. Duke axed a similar 25% stake in a Greek gas company in Q1 2012, while adding on a 240 MW thermal plant and 140 MW hydropower facility to its Chilean operations.

In total, Duke directly or indirectly generates 4,900 gross MW of international energy. That’s approximately 10% of the utility’s U.S. generation capacity, a significant slice of its portfolio pie. The utility beat top-line and earnings estimates last quarter and could be ready for some serious growth with its $12 billion of modernization projects well under way.

(Inter)National Grid
National Grid is anything but, unless you’re based in the United Kingdom. This utility is listed on the U.S. stock exchange, but its blood runs …read more
Source: FULL ARTICLE at DailyFinance

By Travis Hoium, The Motley Fool

Filed under: Investing

Over the past few weeks, we’ve been giving a lot of attention to the new records that the Dow Jones Industrial Average and S&P 500 have reached. Really, they’re nothing more than psychological levels that only indicate how much stock prices have moved since the last high. The indexes we quote every day don’t tell us the whole picture of just how much stocks have returned to investors.

Dividends play a key role in any return a stock generates, and we should really consider dividends when looking at markets, as well. The chart below shows the returns of both the Dow and S&P 500 since the S&P’s last record high on October 9, 2007. I’ve also included the total return indexes, which account for dividends paid by companies in each index.

^SPXTR data by YCharts

As you can see, there’s a large gap in the returns of a total return index and the regular index. The Dow’s gap between the dividend and non-dividend index is wider because its companies pay more in dividends than the S&P 500, which you can see has generated higher returns. Today, the SPDR Dow Jones Industrial Average ETF pays a 2.36% dividend yield, and the SPDR S&P 500 pays a 2.04% yield, so the gap continues.

Dividends matter
A regular dividend payment forces management to focus on cash flow instead of throwing money after growth projects. This can keep them more disciplined with investors’ money, which generates higher returns.

The other reason dividends are so important to investors is that they usually come from established, more value-oriented companies, not high-flying growth stocks. On average, these value dividend stocks will beat out growth stocks long term, which is what Foolish investors should be focused on.

Dividends to buy today

If you’re looking for some long-term investing ideas, you’re invited to check out The Motley Fool’s brand-new special report, “The 3 Dow Stocks Dividend Investors Need.” It’s absolutely free, so simply click here now and get your copy today.

The article Dividends Key to Making Money in the Market originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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