Workers install a new substation and add circuits to improve the reliability of a FirstEnergy unit’s electric network.
The U.S. is trying to wean itself off fossil fuels, and
an Ohio-based electric utility, should be among that campaign’s winners.
The outlook for electric utilities is the best in decades, as they invest in transmission grids and renewable power to meet demand from electric vehicles, heating, and appliances. The whole sector is heating up.
Warren Buffett’s Berkshire Hathaway
(ticker: BRK.A) already owns MidAmerican Energy, one of the nation’s largest utilities. Buffett likes the group’s steady, regulated returns.
FirstEnergy (FE) looks like one of the better plays among public companies. It has a dividend yield of 3.9%, about a quarter-point above the sector median, and an improving outlook as it seeks permission to raise rates in several states over the next few years.
The stock, now around $40, is down from a high of $49 last April because of rising interest rates and a utility selloff. It trades for 16 times projected 2023 earnings of $2.54 a share, the midpoint of the company’s guidance. That’s a discount to the utility group, which fetches about 18 times earnings.
FirstEnergy projects 6% to 8% growth in annual earnings per share through 2025—slightly better than many peers—as it invests along with the rest of the industry to expand its transmission network and strengthen the electric grid in a service area…