CMS Energy Corporation - Growth & Income

Investors looking for a juicy dividend and some growth should check out CMS Energy Corporation (CMS). The utility yields a hefty 4.4% and analysts expect the company to grow EPS by 8% in 2010 and 7% in 2011.

The stock appears to be reasonably priced too, trading at 13x forward earnings. It is a Zacks #2 Rank (Buy) stock.

Third Quarter Results

The company reported third quarter earnings per share of 52 cents, beating the Zacks Consensus Estimate by 5 cents. It was a 73.3% increase over the same quarter in 2009.

Operating revenue was up an impressive 14.3% over the same quarter in 2009 due in part to a rate increase. Some of that increase was also due to favorable weather in 2010.

Meanwhile, operating income surged 38.7% year-over-year as the company was able to leverage its fixed expenses.

Outlook

Management reiterated its guidance for 2010 of about $1.35 per share following the strong quarter. The Zacks Consensus Estimate is a penny higher at $1.36. This represents an 8% increase over 2009 EPS.

The 2011 estimate is 7% higher at $1.46.

Dividend

After about a 5 year hiatus, CMS began paying a dividend again in 2007. It has raised it every year since then.

It currently yields a hefty 4.4%. More dividend increases could be on the way, too, as the company's payout ratio is a relatively low 39%.

Valuation

Shares have risen more than 25% since early July:

Despite the run up in share price, valuation still remains in check. Shares trade at 13.0x forward earnings, a discount to the industry average of 14.0x. Its price to book ratio is a reasonable 1.5.

CMS Energy Corporation is an energy company headquartered in Jackson, Michigan. It operates an electric and natural gas utility, Consumers Energy, as well as independent power generation businesses.

CMS has a market cap of $4.6 billion and is a Zacks #2 Rank (Buy) stock.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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