Entergy Corporation (NYSE:ETR) is also doing what it can to control its costs. The thought of taking hefty charges to retire a nuclear plant early might not make a lot of sense until you understand that it saves money through job cuts as well. Through a companywide human capital management overhaul as Entergy likes to call it, or a restructuring as the rest of us would refer to it, the company should be able to save $200 million to $250 million on annual basis by 2016 — adding potentially $1 to EPS just on cost savings alone!
Energy efficiency also offers a way for Entergy to stand out from its peers. The company, between 2002 and 2011, invested $79 million in energy efficiency programs that delivered 185 MW of savings.
Show me the money, Entergy
Entergy’s performance since the recession hasn’t been anything to write home about, but its plan to build shareholder value is certainly worth taking note of. One of the ways that Entergy hopes to boost shareholder value is through share repurchases. Although share repurchases don’t put money directly into investors’ pockets, they do make a company appear cheaper on a P/E basis by reducing the number of shares outstanding. Since 2003, Entergy has brought its outstanding share count down from 231 million to 178 million all while its book value has risen from $38.04 to $52.02 in the most recent quarter.
The big allure for Entergy, though, is its dividend. Although the company has failed to raise its dividend since 2010, you’ll probably get no complaints from shareholders:
Source: Nasdaq.com.
*Assumes a quarterly payout of $0.83 for the remainder of 2013.
Based on Entergy’s Friday closing price, shareholders are currently receiving a U.S. Treasury bond-thumping 5.3% annual yield! Since the beginning of 2003, Entergy’s dividend has been increased just four times, but for a cumulative jump of 137%! Another way to look at it is this: since 2003, Entergy has paid out nearly $30 per share in cumulative dividends! Furthermore, with a payout ratio of just 67% based on this year’s projected EPS, Entergy’s dividend is both sustainable and likely to grow in the future as it’s able to pass along price hikes to consumers.
Foolish roundup
Obviously, Entergy isn’t perfect. It could certainly use a little alternative-energy pep in its step and would love to see a nuclear subsidy from the U.S. government. However, when push comes to shove there are fewer electric utilities valued as cheaply as Entergy. At its forward P/E of just 12 and less than four times free cash flow, investors are getting a utility with a basic-needs product that consistently produces profits and pays out better than 5% each year!
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends Exelon.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
