ee

companies, including Growth Holding

Entergy Corp (NYSE: ETR), and we detail the US Department of Energy’s approval of liquefied natural gas exports from the Freeport LNG proj-ect in Texas. We also introduce two new members of the UF team, Ari Charney and Richard Stavros.

For the last 23 years Utility Forecaster’s mis-sion has been to provide a solid framework

for identifying high-quality dividend-paying essen-tial-service stocks upon which we hope to build in this and in the issues ahead. There are plenty of distractions—including Washington, DC, scandals as well as discussions of market “tops” and impending corrections—that might draw your eyes off the long-term prize of building wealth. But first-quarter 2013 earnings results were generally solid.

The Feature Article, meanwhile, addresses the recent run-up and subsequent cool-down for divi-dend-paying stocks and identifies high-quality names trading at or below our value-based buy-under targets. Our portfolio update has the details on our Growth and Income Portfolios. Utility Beat has an update on a recent US Supreme Court ruling that positively impacts three

The Utility Forecaster Safety Rating System is a method of separating high-quality companies suitable for inves-

tors of all risk tolerances. It continues to guide our analysis and to shape Portfolio decisions.

The strong first-quarter rally for utilities and other defen-sive dividend-paying stocks that carried through April faded a bit in May.

Nevertheless, many of the buy-rated fare in the How They Rate coverage universe and most of our Portfolio Holdings are still priced above another key component of the Utility Forecaster method: the buy-under target.

The Safety Rating System includes eight financial, operat-ing and regulatory metrics, including:• A worst estimated 2013 payout ratio greater than 0

percent but less than 80 percent;• A dividend increase over the last 12 months, which

demonstrates the ability to weather tough times;• Deriving less than 10 percent of earnings from unreg-

ulated operations, which ensures consistency of earn-ings despite economic ups and downs;

• A bond rating equivalent to BBB- (stable) or higher,

from at least one of the major credit-rating agencies, which indicates an investment-grade balance sheet that’s likely to avoid a downgrade;

• Minimal debt needing to be rolled over through 2014, enabling it to withstand a tight credit market;

• Good regulatory relations, with diversity and/or demonstrated cooperation with officials in key states or federal agencies;

• Fuel cost exposure that’s neutral or positive (for energy) and free cash flow positive for other groups;

• And geographic diversification or concentration in a recession-resistant regional economy.

Criteria vary somewhat from sector to sector to allow for differences in fundamentals. One point is awarded for each criterion met.

Buy-under targets are based on two things, quality and prospective return. The first is established by the Safety

June 2013 • Volume 25 • No. 6

Utility ForecasterGrowth • Safety • Income • Reliability David Dittman, Editor

Where the Buys are

change and continuity

Saturday, June 29: July 2013 issue available online

www.UtilityForecaster.com

IN BRIEF

Hulbert Financial Digest 2012 Honor Roll

N

Daily action in the index of 20 electric utilities traded on the Philadelphia Stock Exchange. Source: Bloomberg

UTY Index Value

440

460

480

500

520

540

560

Nov 21 Dec 21 Jan 21 Feb 21 Mar 21 Apr 21 May 21

Mid-Spring Cooldown

Rating System. The second is basi-cally the dividend plus prospective growth, preferably in the dividend rate.

One reason dividend growth is important for a stock is it sets a new baseline price. The more a company can pay out consistently, the higher its stock will trade, particularly if investors have been buying it because it pays dividends.

Dividend growth is also the best possible indicator of dividend safety. It’s the most powerful statement the company’s management and board can make that earn-ings are rising and stable, and that there’s a lot more to come.

This month we briefly profile a dozen members of the How They Rate coverage universe, including eight Portfo-lio Holdings, that score at least “5” according to the Safety Rating System and, as of press time, are trading at, near or below our current buy-under targets.

Diversified UtilitiesLongtime Growth Portfolio Core Holding southern

company (NYSE: SO) has recently broken below its buy-under target and merits serious consideration by income-and-growth-focused investors who don’t already own it.

Management reported solid first-quarter earnings growth and reiterated guidance for the full year. Southern announced a 3.6 percent increase to its dividend, the new rate of $0.5075 per share effective with the June payment. The company also operates in one of the friendliest regula-tory environments in the US.

southern company--which earns a perfect “8” under the UF safety rating system--is a strong buy under 46.

Fellow Growth Portfolio Core Holding entergy corp’s (NYSE: ETR) solid balance sheet, ample dividend coverage and favorable regulatory situation also make it a compelling value at these levels. Management reported an impressive improvement in first-quarter earnings per share, as more normal weather drove electricity sales volume higher.

Management also reiterated full-year operating earnings guidance. entergy, yielding 4.8 percent, is a buy under 75.

Management of Public service enterprise Group inc (NYSE: PEG) raised the company’s quarterly dividend rate by 1.4 percent effective with the March 2013 payment.

PS Enterprise’s long-term growth is sustained by sup-portive regulators in its New Jersey service territory, where it plans to invest $3.9 billion to protect critical infrastruc-ture.

First-quarter earnings were flat, though management maintained full-year guidance of $2.25 to $2.50 per share. Ps enterprise is a buy under 35.

Energy DistributionoNeoK inc (NYSE: OKE) is the subject of this

month’s Growth Spotlight. ONEOK, along with Southern Company as well as Income Spotlight AmeriGas Partners

LP (NYSE: APU), would make an excellent portfolio building block for investors of all risk tolerances.

oNeoK, with a solid record of divi-dend growth through the business cycle, is a buy under 50.

enbridge energy Partners lP (NYSE: EEP) recently completed a major new oil transport system in the Bakken Shale on schedule and under budget. This system will produce significant cash flow in 2013.

Management also announced a plan to sell $1.2 billion of preferred units to its general partner enbridge inc (TSX: ENB,

NYSE: ENB), which indicates strong sponsor support and, critically, will help the LP reduce leverage.

Enbridge Energy Partners’ distribution coverage ratio has shown a worrying trend over the past few quarters, but recent projects and support from Enbridge should help reverse it. And management reiterated full-year adjusted EBITDA guidance when it reported first-quarter results.

enbridge energy Partners, which is rated “5” under the safety rating system, is an aggressive buy under 32.

NV energy inc’s (NYSE: NVE) first-quarter earnings per share surged to $0.09 from $0.05 a year ago, as man-agement reduced costs and the Nevada utility enjoyed the benefits of more normal weather compared to 2012.

NV, which has staged an impressive comeback from diffi-culties in the early part of the last decade, boosted its divi-dend by 11.8 percent during the first quarter. The stock is trading just above its buy-under target as of press time. Wait for a pullback to pick up NV energy under 20.

spectra energy corp (NYSE: SE) closed the acquisition of the Express-Platte Pipeline System ahead of schedule. The company will drop down 50 percent of the asset to spectra energy Partners lP (NYSE: SEP) for $555 mil-lion in cash as well as about $139 million in newly issued partnership units and approximately $129 million of acquired debt.

Spectra Energy Corp stands to gain about $156 million in the transaction.

First-quarter earnings were flat but in line with expecta-tions. spectra energy corp, on track to boost its divi-dend in october, is a buy under 33.

Natural ResourcesBrookfield renewable energy Partners lP’s (TSX:

BEP-U, OTC: BRPFF) first-quarter funds from operations per share of $0.61 suffers by comparison to the $0.66 gen-erated during what was an abnormally strong period in terms of hydrological conditions in 2012.

During the first quarter Brookfield Renewable completed the acquisition of 19 hydroelectric facilities in New England from Nextera energy inc (NYSE: NEE). The deal adds 351 megawatts of low-cost power to 103 megawatts the company already owns in the region, all under license until 2025.

And it complements the purchase of 378 megawatts of hydro capacity in southern Appalachia from a unit of alcoa inc (NYSE: AA) in November 2012.

Page 2 • www.UtilityForecaster.com • 703-394-4931 Utility Forecaster • June 2013

The Quest for Yield

-70%

-50%

-30%

-10%

10%

30%

May'08 May'09 May'10 May'11 May'12 May'13

Five-year total return comparison between the Dow Jones Utility Average (UTIL) and the Chicago Board Options

Exchange 10-Year Treasury Note Index.

Source: Bloomberg

UTIL

TNX

Utility Forecaster • June 2013 703-394-4931 • www.UtilityForecaster.com • Page 3

Utility Forecaster (ISSN 10645373) is published monthly by Investing Daily, a division of Capitol Information Group, Inc., 7600A Leesburg Pike, West Building, Suite 300, Falls Church, VA 22043. © 2013 by Investing Daily, a division of Capitol Information Group, Inc. Address editorial cor-respondence to Utility Forecaster, 7600A Leesburg Pike, West Building, Suite 300, Falls Church, VA 22043. SUBSCRIPTIONS: $149 for one year. EDITOR: David Dittman; MANAGING EDITOR: Ari Charney; CONTRIBUTING EDITOR: Richard Stavros; DIRECTOR OF PRODUCTION AND DESIGN: Melanie Selmer; ANALYSTS: Benjamin Shepherd and Khoa Nguyen; CUSTOMER SERVICE DIRECTOR: Andrea Prendergast; PUBLISHER: Phil Ash. POSTMASTER: Send address changes to Utility Forecaster , P.O. Box 4123, McLean, VA 22103. Please send subscription-related correspondence to above address; enclose mailing label from a recent issue and a new address. For customer service, call 800-832-2330. Readers should not assume that recommendations will be profitable or will equal the performance of previous recommendations. All contents are derived from original or published sources believed to be reliable, but accuracy is not guaranteed. Investing Daily, a division of Capitol Information Group, Inc., its officers and owners and the editors of Utility Forecaster may from time to time have a position in investments referred to in this newsletter. Periodicals postage paid at Falls Church, Va. and other mailing offices. Printed in U.S.A. For permission to photocopy or use material electronically from Utility Forecaster (ISSN 10645373), please access www.copyright.com or contact Copyright Clearance Center, Inc. (CCC) 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users.

This pure-play on clean power, like Southern Company, scores a perfect “8” under the Safety Rating System. Brookfield renewable energy is a buy under 32.

Italy-based Super Oil eni spa (Italy: ENI, NYSE: E) reported a 42 percent decline in first-quarter profit, a result that was in line with expectations and driven by a sharp decline in total oil and gas output due to unexpected shut-downs at operations in Libya, Nigeria and the UK.

Management confirmed growth and profitability targets for the full year 2013, despite the slow quarter. eni is a buy under 50 for aggressive investors looking to profit from a rebound in its operations.

Bargains AbroadManagement of Australia-based aGl energy ltd (ASX:

AGK, OTC: AGLNF, ADR: AGLNY) recently added a lit-tle more color to its fiscal 2013 earnings guidance. Unfor-tunately, that color is decidedly gray.

Numbers for AGL are likely to come in at the bottom half of the forecast underlying net profit after tax range of AUD590 million to AUD640 million when it reports results for the 12 months ending June 30, 2013.

The stock has weakened considerably since the announcement, but the selloff represents an opportunity to buy Australia’s biggest power provider, a company with a diversified portfolio of assets that’s well positioned to profit from the new carbon tax Down Under--at a compelling valuation, just 1.08 times book value. aGl energy is a buy under 16.50.

clP Holdings ltd (Hong Kong: 2, OTC: CLPHF, ADR: CLPHY) reported a decline in power sold in the first quarter. Total power sales--both in Hong Kong and to Mainland China--fell 4.2 percent to 6,655 gigawatt hours.

Local sales dipped 1 percent due to lower heating and a reduced dehumidifier load. Sales to China plunged 49.2 percent in the first quarter, mainly due to lower sales to the economi-cally critical Guangdong prov-ince.

The company, however, remains well positioned to benefit from Chi-na’s long-term growth, whether driven by an investment-led or a consumption-led model. clP Holdings is a

buy under 10.

High-Yield CommunicationsManagement of Growth Portfolio Aggressive Holding

Windstream corp (NYSE: WIN) declared another USD0.25 per share dividend on May 8, which will be paid July 15 to shareholders of record on June 28.

And Windstream posted solid if unspectacular first-quar-ter results that provide further support for the dividend. Strategic businesses have grown to represent approximately 70 percent of overall revenue, and further support for the dividend will come as Windstream transitions out of a high-capital-expenditure period.

CAPEX will trend higher during the first half of 2013 and then decrease “considerably” in the third and fourth quarter as fiber-to-the-tower and stimulus investments decline.

During its first-quarter earnings conference call manage-ment reiterated its commitment to the current payout rate, noting, “The dividend remains core to Windstream’s strat-egy and we believe it is the best way to return value to our shareholders.”

Windstream refinanced debt and reduced interest costs, and the company has another opportunity to cut costs via the refinancing of a note coming due in August 2013. Management also plans to reduce company debt by over USD200 million this year by directing excess free cash flow after the dividend to debt repayment.

Looking beyond 2013, Windstream expects stable adjusted operating income results, combined with further reductions in capital spending and cash interest, which will position the company to generate solid and sustainable free cash flow, even with the expectation that cash taxes will increase, absent the continuation of bonus depreciation.

Windstream—currently yielding more than 11 per-cent—remains a buy under UsD11.

saFe ValUecompany (exchange: symbol) Price yield safety rating sector adviceAGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR; AGLNY) $14.78 4.3% 6 Foreign Utilities Buy < 16.50Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF) 30.43 4.8 8 Natural Resources Buy < 32CLP Holdings Ltd (Hong Kong: 2, OTC: CLPHF, ADR: CLPHY) 8.96 2.4 5 Foreign Utilities Buy < 10Enbridge Energy Partners LP (NYSE: EEP) 30.91 7.0 5 Energy Distribution Buy < 32Eni SpA (Italy: ENI, NYSE: E) 47.31 4.7 5 Natural Resources Buy < 50Entergy Corp (NYSE: ETR) 70.30 4.7 5 Diversified Utilities Buy < 75NV Energy Inc (NYSE: NVE) 20.79 3.7 5 Energy Distribution Buy < 20ONEOK Inc (NYSE: OKE) 49.34 2.9 5 Energy Distribution Buy < 50Public Service Enterprise Group Inc (NYSE: PEG) 34.77 4.1 6 Diversified Utilities Buy < 35

Southern Company (NYSE: SO) 46.44 4.4 8 Diversified Utilities Buy < 46Spectra Energy Corp (NYSE: SE) 31.94 3.8 6 Energy Distribution Buy < 33Windstream Corp (NYSE: WIN) 8.79 11.4 5 Communications Buy < 11Price, Yield as of 05/21/13, close. Safety Rating is the number of criteria satisfied under the UF Safety Rating System, explained in the footnote following the How They Rate table. Sector indicates the How They Rate group within which the stock appears. Advice is what to do now.

Coming into earnings season Growth Port-folio Aggressive Holding Atlantic Power

Corp (TSX: ATP, NYSE: AT) faced a wall of skepticism after it cut its dividend by 65.2 per-cent.

Atlantic also signaled a subtle but significant strategic shift: The need to preserve sufficient cash to fund deals that may present longer lag times from investment to realization of cash flows was a major factor contributing to a new dividend policy.

Results for the first quarter of 2013 indicate Atlantic is making solid progress on five bench-marks we identified shortly after the dividend cut, including the sale of its Path 15 transmis-sion line in California and the disposition of three Florida plants for proceeds of $173 mil-lion in cash.

Atlantic also syndicated its tax equity invest-ment in its Canadian Hills wind project, hitting a third marker. The first-quarter payout ratio was 38 percent, fulfilling the fourth of our five criteria.

The asset sales and the Canadian Hills syndi-

cation generated $151 million in cash to rede-ploy toward new growth projects during the second half of 2013. And this is the major open question.

Management also reaffirmed its forecast for full-year 2013 project adjusted EBITDA of USD250 million to USD275 million, as well as its payout ratio range of 65 percent to 75 per-cent.

Atlantic noted good progress with recent projects, including the commencement of com-mercial operation for the company’s 53.5 megawatt Piedmont Green Power biomass project in Georgia. But no new projects were announced.

Management has done enough to justify keeping the stock in the Portfolio. But Atlan-tic Power remains a hold pending develop-ments with new projects.

Dividend Growth

Atlantic’s first-quarter financial and operating results and management commentary provided some reassurance. The news from other Portfo-

Atlantic Battles

PORTFOLIO UPDATE

PortfoliosIt wouldn’t be fair to our paying subscribers to give away our picks, but we can share the current returns and yields of our portfolios.

GROWTH PORTFOLIO (29 positions) Goal: To generate high total returns.

Average total return: Conservative picks—333%; Aggressive picks—177%

Average yield: 3.8%

INCOME PORTFOLIO (26 positions) Goal: High current yield, safety and ability for dividend growth to beat inflation.

Average total return: 100% Average yield: 5.1%

COMBINED SUMMARY (55 positions) Average total return: 194%

Average yield: 4.4% Average holding period: 8.56 years

Page 4 • www.UtilityForecaster.com • 703-394-4931 Utility Forecaster • June 2013

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lio Holdings was more uplifting. Here are high-lights.

Super Oil chevron corp (NYSE: CVX) raised its payout by 11.1 percent, as management noted solid progress in its development pro-grams. Earnings per share were down year over year.

But chevron, on the strength of the divi-dend increase, is now a buy under 117.

Buckeye Partners lP (NYSE: BPL) announced its first distribution increase since the fourth quarter of 2011, as first-quarter distribut-able cash flow per unit surged to $1.20 from $0.77. Buckeye Partners is now a buy under 56.

Enterprise Products Partners LP (NYSE: EPD) management raised the MLP’s distribution for the 35th consecutive quarter. First-quarter dis-tributable cash flow per unit was up 20 percent to $1.02, enough to justify a 1.5 percent payout increase. enterprise Products is a buy under 58.

Kinder Morgan energy Partners lP (NYSE: KMP) raised its payout by a modest 0.8 percent, as distributable cash flow ticked up to $1.43 per unit from $1.37. Kinder Morgan energy Part-ners is a buy on dips to 88.

Nisource inc (NYSE: NI), meanwhile, announced a 4.2 percent dividend increase, though first-quarter earnings per share dipped to $0.69 from $0.76 due to a higher share count. Nisource is a buy up to 25.

And Xcel energy inc (NYSE: XEL), along with reporting a 26.3 percent earnings increase driven by colder weather, announced a 3.7 per-cent dividend increase. Xcel is a buy under 26.

Something in the Water

american Water Works co inc (NYSE: AWK) reported solid earnings growth and added 22,000 customers. In addition to affirming its full-year earnings guidance of $2.15 to $2.25

per share, management boosted the dividend rate by 12 percent.

Even after a corresponding 12 percent boost to its buy-under target, the stock is trading above what we consider a solid entry point for new investors. Nevertheless, american Water Works is a buy on dips to 37.

Fellow Growth Portfolio Core Holding and water utility aqua america inc (NYSE: WTR) posted 23 percent net income growth, and earn-ings per share surged by 22 percent. Manage-ment announced plans for a 5-for-4 stock split as well as an 8.6 percent increase in the quarterly dividend rate.

aqua america is now a buy on dips to 26.

Good Guidance

atmos energy inc (NYSE: ATO) boosted its full-year earnings per share guidance to $2.45 to $2.55, though first-quarter EPS ex-items of $1.25 were down from $1.28 due to changes to the rate structure in a key market in its 12-state territory. atmos remains a buy under 33.

MDU resources Group inc (NYSE: MDU) raised its full-year EPS guidance to $1.30 to $1.40, as management reported a 57.9 percent first-quarter profit increase. MDU is a buy under 24.

And integrys energy Group inc (NYSE: TEG) lifted its full-year EPS target range to $3.32 to $3.67. First-quarter adjusted EPS were up to $1.76 from $1.56 a year ago. integrys is a buy under 55.

At the other end of the spectrum, Nustar energy lP (NYSE: NS) reduced its full-year guidance range for earnings before interest, taxa-tion, depreciation and amortization to $591 mil-lion to $651 million, even as management reported that first-quarter distributable cash flow per unit was up to $0.70 from $0.60 a year ago.

Nustar, which is currently yielding nearly 9 percent, remains a buy under 55.

Utility Forecaster • June 2013 703-394-4931 • www.UtilityForecaster.com • Page 5

on May 20 the US Supreme Court ruled in favor of PPl corp (NYSE: PPL) in a dispute with the

US Internal Revenue Service over credits the company claimed to offset overseas tax payments.

In a unanimous ruling the Court found PPL can claim $39 million in US foreign tax credits against a 1997 British windfall tax. At least two other US-based utilities—Growth Portfolio Core Holding entergy corp (NYSE: ETR) and american electric Power co (NYSE: AEP)—stand to benefit from the ruling.

Entergy and AEP were both subject to the windfall tax after they acquired UK-based utility companies that were privatized in the 1980s and ’90s.

The IRS had rejected the companies’ foreign tax credit claims, arguing that the windfall tax didn’t meet the definition of a tax for which credits can be claimed. Foreign tax credits are normally available to US companies to avoid double taxation.

Two appellate courts had offered different opinions in the dispute, forcing the Supreme Court’s intervention.

The unanimous decision stated that the UK windfall profits tax, which was imposed on companies after they were privatized, was not, as the British government claimed, a tax on the difference between the value at which the companies were sold and the value for which they should have been sold. The Court found that the way a foreign government characterizes a tax has no bearing on the “US creditability analysis.”

The Court explained that the Third Circuit had adopted the UK’s characterization of the tax and, on that basis, found that the tax failed the gross receipts and realization tests because it taxed some artificial valuation instead of profits.

PPL argued throughout the process that the UK windfall tax was based on actual profits earned by the company, no matter what the British government said, and that it should therefore be creditable against US income taxes.

The Court agreed with the argument “that the predominant character of the windfall tax is that of an excess profits tax, a category of income tax in the US sense” and was therefore creditable.

In response to the IRS’ objection to the rearrangement of the UK tax formula, the Court emphasized that it wasn’t bound by the UK’s characterization, especially since the UK’s method of calculating the tax was artificial. Accordingly, the Court followed “substance over form and recognized that the windfall tax is nothing more than a tax on actual profits above a threshold.”

AEP filed a brief in the PPL case in support of the utility, noting that it too is involved in a similar dispute with the IRS.

As of press time the Supreme Court was set to rule on a companion case involving Entergy that has been pending while the PPL case was decided. Entergy, which is seeking a credit of almost $234 million, won its case at the appeals court level.

The Supreme Court is expected to dismiss the subsequent appeal of that ruling filed by the IRS.

A Fast Track for LNG Exports?

The US Department of Energy (DoE) has ended the freeze on liquefied natural gas (LNG) exports, issuing a conditional approval on May 17 for the Freeport LNG Terminal on Quintana Island, Texas, to ship to countries that don’t have free-trade agreements with the US at a rate of up to 1.4 billion cubic feet a day.

The DoE’s approval of unrestricted LNG exports from the Freeport export plant is the first such project approved in two years and only the second to win DoE approval to export gas to countries that don’t have free-trade agreements with the US.

In 2011 the DoE authorized cheniere energy inc’s (NYSE: LNG) and cheniere energy Partners lP’s (NYSE: CQP) Sabine Pass LNG Terminal in Cameron Parish, Louisiana, to export LNG.

Freeport, which is owned by conocoPhillips (NYSE: COP), Dow chemical co (NYSE: DOW) and osaka Gas co ltd (Japan: 9532, OTC: OSGSF), had previously been approved to export LNG to free-trade agreement countries.

May 17 was basically the first day on the job for new Secretary of Energy Ernest Moniz. The decision is a good sign for future export-permit applicants, though open questions remain as to whether this apparently quick turnaround will be replicated and if, in fact, more permits will be granted.

At the same time, management of both Dominion resources inc (NYSE: D) and sempra energy (NYSE: SRE) remain confident their respective projects are well positioned in the queue and will receive permits later this year.

In its statement announcing the Freeport decision the DoE noted it will continue to process applications on a case-by-case basis according to the “order of precedence” list previously established. Freeport was first on this list, followed by energy transfer equity lP’s (NYSE: ETE) Lake Charles facility, Dominion’s Cove Point project, a Freeport project and Sempra’s Cameron project.

These projects are in different stages in terms of counterparty contracts, engineering, procurement and construction agreements and Federal Energy Regulatory Commission (FERC) permitting.

Page 6 • www.UtilityForecaster.com • 703-394-4931 Utility Forecaster • June 2013

UTILITY BEAT

the court Pleases

After the DoE ruling Japan-based Mitsui & co ltd (Japan: 8031, OTC: MITSF, ADR: MITSY) and Mitsubishi corp (Japan: 8058, OTC: MSBHF, ADR: MSBHY) and France-based GDF suez (France: GSZ, OTC: GDSZF, ADR: GDFZY) signed agreements to invest up to $7 billion in the Cameron LNG project in Louisiana.

Cameron could begin exporting LNG in 2017; it’s the only LNG export project to proceed to the point of having a FERC environmental review schedule.

DRIP Your Way to Wealth

Temper of the Times offers Utility Forecaster readers the opportunity to buy into dividend reinvestment plans (DRIP) of Portfolio favorites at a discount, including both of this month’s Spotlight stocks featured on p. 12.

And be sure to check the MoneyPaper enclosed with your regular issue for more DRIP suggestions outside our How They Rate universe. Contact Temper at www.DirectInvesting.com, by calling 800-388-9993 or by writing to PO Box 461, Rye, NY 10580.

The New Lineup

Many of you may recognize my name from reading related advisories such as Canadian Edge and Australian Edge. I’ve also been managing editor of Utility Forecaster since August 2004.

During the past decade I’ve steeped in the analytical framework established by the Utility Forecaster Safety Rating System. In order to provide the highest level of service as UF enters its next phase, however, we’ve added two solid financial industry veterans to the team.

Ari Charney, who’s taken over as managing editor, has extensive experience that includes stints picking apart spreadsheets in the corporate accounting department at Moody’s Investors Service and analyzing investment newsletters for nearly eight years at The Hulbert Financial Digest.

In addition to his numbers-crunching and analytical abilities Ari is a capable wordsmith with a keen eye for detail.

Richard Stavros, who will write the complementary Utility & Income every other week beginning with the June 3, 2013, edition, is also is a managing director of Thomas Dwight Capital (TDC), a strategic, financial and business development adviser to corporations, investment houses and governments.

Richard specializes in emerging markets opportunities in the energy, telecommunications, shipping and real estate sectors.

Ari, Richard and I look forward to helping you build wealth for the long term.

Thanks for reading Utility Forecaster.

It was another quiet month for dividend cuts by components of the How They Rate coverage universe. In fact three companies that also appear on the Dividend Watch List posted financial and operating results that provide support for their current payout rates.

PVR Partners LP (NYSE: PVR) posted first-quarter distributable cash flow per unit of $0.52, up from $0.37 a year ago and good enough to narrow the distribution coverage ratio from 0.71 a year ago and 0.65 in the fourth quarter of 2012 to 0.95.

The MLP executed agreements with major producers in the Utica Shale and the Cline Shale to share early-stage development costs for a gathering and trunkline system and to provide gathering and processing services.

Management, which affirmed full-year EBITDA guidance, also noted that PVR has contracted about 90 percent of 2013 coal production and one-third to one-half of anticipated 2014 output. PVR is a buy under 25.

Chesapeake Energy Corp (NYSE: CHK) reported a 67 percent increase in first-quarter adjusted net income due to higher natural gas prices and production increases. Management also boosted 2013 cash flow guidance.

Debt remains a concern here. But a payout ratio based on trailing 12-months’ earnings of 56.5 percent is further support for boosting our rating on the stock. Chesapeake Energy is now a hold.

E.ON SE (Germany: EOAN, OTC: ENAKF, ADR: EONGY), meanwhile, reported a 25 percent increase in net income. Underlying earnings were down 16 percent to EUR1.39 billion but exceeded analysts’ estimates. E.On remains a hold.

Utility Forecaster • June 2013 703-394-4931 • www.UtilityForecaster.com • Page 7

DiViDeND WatcH list

a Pleasant spring

Worst Safety Company Payout* Payout+ Debt^ Rt#

Chesapeake Energy 56.5% 155.0% 0.464 2

Deutsche Telekom AG NEG 155.0 8.052 2

E.On SE 96.5 95.6 6.185 5

Ferrellgas Partners LP 102.0 120.0 0.000 1

Otter Tail Corp 106.3 86.2 0.041 2

Partner Communications Ltd 44.2 114.4 0.083 0

PG&E Corp 61.3 73.1 1.751 4

Penn West Petroleum Ltd 49.1 80.0 0.055 2

Portugal Telecom SA 240.7 342.1 2.447 2

PVR Partners LP 142.8 101.8 0.000 3

Suez Environnement Co 97.0 118.2 1.125 3

TECO Energy Inc 75.9 96.7 0.000 3

Telecom Corp of New Zealand 133.3 128.6 0.052 1

TransAlta Corp NEG 163.4 0.494 3

Veolia Environnement SA NEG 241.4 2.142 2

*Dividend rate as a percentage of last 12 months’ earnings. +Based on lowest Wall Street estimate for 2013. ^Debt maturities through 2014 in billions of dollars. #UF Safety Rating is based on a 0 (riskiest) to 8 (saf-est) scale. Criteria listed in table key following How They Rate on p. 7.

AmeriGas Partners lP (NYSE: APU) has achieved remarkable scale

in an industry otherwise marked by its fragmentation.

The propane distributor benefitted from colder winter weather, as adjusted earnings before interest, taxation, depre-ciation and amortization (EBITDA) were up 29.1 percent to USD317.6 mil-lion from USD246 million a year ago.

The inclusion of a full period’s contri-bution from Heritage Propane, which was acquired on Jan. 12, 2012, also drove results.

For the three months ended March 31, 2013, retail propane volumes sold were 464.4 million gallons compared with 389.4 million gallons a year ago. Weather for the quarter was 1.5 percent warmer than normal but 24.5 percent colder than in 2012, according to the National Oceanic and Atmospheric Administration.

Distributable cash flow per unit was USD2.78, up from USD2.20 a year ago.

AmeriGas declared a distribution of

USD0.84 per unit, or USD3.36 on an annualized basis, up from USD0.80. The coverage ratio for the period--a sea-sonally strong one--was 3.14 times. The trailing 12-month coverage ratio was 1.1 times.

Management reiterated its fiscal 2013 adjusted EBITDA guidance of $632.5 million, which implies a significant increase in second-half cash flow from the year-ago level. Part of the antici-pated step-up is attributable to savings associated with the Heritage Propane acquisition, which APU expects will be at least $60 million annually.

The 5 percent distribution increase is sufficient reason to boost our buy-under target for the MLP. And the company is well positioned to deliver annual distri-bution growth of at least 4 percent from fiscal 2013 through fiscal 2016 based on forecast contributions from the $2.6 bil-lion Heritage acquisition.

ameriGas is now a buy under UsD48 for investors who don’t already own it.

ameriGas Partners lP

Nothing suggests confidence in pres-ent and future prospects on the

part of management than a dividend increase.

A raised payout does not in and of itself signal that a stock will immediately and forever tick higher. But over time capital appreciation follows the trend line established by dividend growth.

oNeoK inc (NYSE: OKE), a diver-sified energy company with oil and gas production and natural gas processing, gathering, storage and transmission assets principally located in the US Mid-west, has boosted its payout 10 times over the past half-decade.

Not once--not even during the Great Financial Crisis--did management cut the payout. And during this time ONEOK is up more than 95 percent in price-only terms.

ONEOK, along with its announce-ment of fourth-quarter and full-year 2012 results, revised downward its guid-ance for long-term earnings and divi-dend growth. This precipitated a 6 per-cent slide in the share price in late

February.Investors overdid it when they sold off

after the guidance revision. They subse-quently pushed the stock to a new all-time high in mid-April. ONEOK has backed off again, presenting an opportu-nity for new investors to establish posi-tions.

First-quarter earnings declined 8.4 percent, as its oNeoK Partners lP (NYSE: OKS) segment reported a 34 percent profit decline on narrower natu-ral gas liquids (NGLs) price differentials and ethane rejection in its NGLs busi-ness. The partnership’s natural gas gath-ering and processing business was affected by lower realized commodity prices.

But the long-term picture is healthy: ONEOK forecast three-year net income growth of 15 percent to 20 percent and an aggregate dividend increase to 2015 of 55 percent to 65 percent.

That will start in July with an antici-pated boost of $0.02 per share.

oNeoK is a buy under UsD50 for long-term growth and income.

oNeoK inc

ONEOK IncUS Exchange: Symbol NYSE: OKE

Price $49.34

Yield 2.9%

Debt-to-Assets 46.3%

Dividend Growth 18.0%

Payout Ratio 79.6%

Analyst Buy--Hold--Sell 7--5--1

Market Capitalization $10.2 Billion

Approximate Ex-Dividend Dates F, M, A, N--15

UF Safety Rating (Ute Type) 5 (Diversified)

Debt Due 2014 $0

Phone 918-588-7158

Price, Yield as of 05/21/13, close.

Dividend reinvestment and direct stock purchase avail-able ($250 minimum investment). Dividends are taxed as a common stock.

More information is available at www.oneok.com.

GROWTH SPOTLIGHT

INCOME SPOTLIGHT

AmeriGas Partners LPUS Exchange: Symbol NYSE: APU

Price $47.44

Yield 7.1%

Debt-to-Assets 52.6%

Dividend Growth 5.0%

Payout Ratio 88.6%

Analyst Buy--Hold--Sell 0--4--4

Market Capitalization $4.4 Billion

Approximate Ex-Dividend Dates F, M, A, N--17

UF Safety Rating (Ute Type) 4 (Diversified)

Debt Due 2014 $0

Phone 610-337-7000

Price, Yield as of 05/21/13, close.No dividend reinvestment. Monthly distributions will be taxed as a master limited partnership, partly tax-deferred return of capital.

More information is available at www.amerigas.com.

Price per Share ONEOK Inc

Price per Share AmeriGas Partners LP

Source: Bloomberg

Source: Bloomberg

36

38

40

42

44

46

$48

May 21‘12

May 21 ‘13

Apr 17 '

Apr 17'

9

10

11

12

13

$14

12 13