Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

The Gas Utilities segment distributes and transports natural gas to approximately 527,000 customers in Colorado, Iowa, Kansas, and Nebraska. It also provides related services, such as appliance repairs, gas technical services, and the sale of temporarily-available, contractual pipeline capacity from its suppliers. This segment owns 626 miles of intrastate gas transmission pipelines and 19,638 miles of gas distribution mains and service lines.

The Oil and Gas division explores, produces, and operates oil and natural gas interests located in Colorado, Louisiana, Montana, Oklahoma, New Mexico, North Dakota, Wyoming, Texas, and California. As of December 31, 2010, this segment had approximately 131 billion cubic feet equivalent of natural gas, as well as oil reserves.

The Coal Mining group mines, processes, and sells low-sulfur coal at its coal mine near Gillette, Wyoming. The Energy Marketing segment engages in the marketing of natural gas, crude oil, coal, power, environmental products, and related services in the United States and Canada. The Power Generation segment produces and sells electric power from coal and gas in Wyoming. The company was founded in 1941 and is headquartered in Rapid City, South Dakota.

Unlike many utilities, Black Hills hasn't seen revenues decrease in the last 3 years. In fact, they've gone higher, from $1.006 billion in 2008 to $1.307 billion in 2010. This year, 4 anlaysts have a consensus estimate of $1.36 billion, then see $1.45 billion in 2012. Part of the improvement came from management's continued efforts for rate relief. It receives permission to raise rates in 4 of its jurisdictions in 2010 and in Iowa in early 2011. Applications are in for higher gas rates in Colorado and Kansas. The utility also wants to build a third gas-fired plant in Colorado and has a permit request pending.

Earnings were released last week. Some of the highlights were:
Adjusted net income was 32 cents a share compared to 19 cents in 2010 in th second quarter (on a non-GAAP basis). On a GAAP basis, results were 19 cents a share vs a loss of 22 cents per share in 2010. (Analysts expected 16 cents.) For six months ended June 30, adjusted net income was 91 cents a share compared to $1.01 a share ins 2010 (non-GAAP). On a GAAP basis: 87 cents a share for the first six months vs 58 cents.

The company released these updates:

-Construction of Colorado Electric's 180 megawatt power plant in Pueblo, Colo., is on schedule and under budget with estimated total capital expenditures of $227 million.
-Construction of Colorado IPP's 200 megawatt power plant in Pueblo, Colo., is on schedule and on budget with estimated total capital expenditures of $260 million.
-On April 28, 2011, Colorado Electric filed a rate request with the Colorado Public Utilities Commission seeking a $40.2 million, or an 18.8 percent, increase in annual revenues, with proposed new rates effective Jan. 1, 2012, the projected start date of commercial operations at the facilities.
-A settlement has been reached for Colorado Electric's proposal to rate base the utility's 50 percent ownership of a 29 megawatt wind turbine project. A decision by the Colorado Public Utilities Commission is expected during a hearing on Aug. 8. The project will require a net capital investment by the utility of $27 million and will be operational no later than Dec. 31, 2012.
-On Aug. 1, 2011, Cheyenne Light filed an integrated resource plan with the Wyoming Public Service Commission and a request for a certificate of public convenience and necessity to construct and operate a new $158 million, 120 megawatt electric generation facility. The facility will include three 40 megawatt, simple-cycle, natural gas-fired turbines, and is expected to commence operation in 2014.
-The energy marketing segment continued to execute its diversified commodity strategy and grow its origination business. Volumes were up across all commodities, and overall gross margin improved by $3.6 million or 40 percent.
-The oil and gas segment reported flat earnings reflecting restricted capital expenditures and reduced net average received prices. The Mancos horizontal test drilling program advanced in the San Juan and Piceance Basins. The San Juan well has been drilled, cased and cemented and is currently being fracture stimulated. The first Piceance well has also been drilled, cased and cemented and is awaiting completion and fracture stimulation. The permit to drill a second Piceance well was received, the location is constructed, and a drilling rig is being moved to the site. Results for all three Mancos test wells are expected by year-end.
-A $150 million, one-year, unsecured term loan with a cost of borrowing of 125 basis points over LIBOR was closed during the quarter. This term loan reduced revolver borrowings and will result in interest savings of approximately $700,000 in 2011.

For the full year, 7 analysts have a consensus estimate for earnings of $1.75 compared to $1.66 last year. For 2012, look for $2.27. Earnings have been erratic over the last 3 years: 18 cents in 2008, then $2.32 in 2009.

There is a drag on earnings: the nonregulated operations. This group has been unprofitable for the first part of this year. Low natural gas prices hampered gas and oil exploration and production. Oil prices which were higher earlier in the year, weren't enough to offset the low gas prices since most of the work in this division is devoted to gas. Management is dissecting this group and will determine its future by yearend.

The stock is down from $34.80 earlier this year. Investors may be concerned about the gas unit or they may wonder about the uncertainty caused by the company's interest rate swap contract which affect earnings, positively and negatively. It dented 2010 by 25 cents but added 9 cents in the first quarter of this year. Its future impact is impossible to predict because it's based on interest rate movements. Since the Fed announced yesterday that it sees low rates at least until 2013, it seems the volatility of this swap will diminish for at least a couple of years.

Income investors are here for the dividend. And BKH, in spite of its erratic earnings pattern, has raised the dividend every year for decades. Last year, it paid $1.44, up from $1.42 in 2009. This year, look for $1.46 for a current yield of 5.5%. It takes about 88% of earnings to pay the distribution. Next payment is August 31. Ex-dividend date is August 16.

Essential numbers: Market Cap is $1.09 billion. Trailing P/E is 17 while Forward P/E is 12. Price to sales ratio is .86. Price to book value is .95. Book value is $28.25. Operating margin for the last 12 months was 13.53%. Profit margin was 5.00%. Return on equity was 5.78% and Return on assets was 3.06%. There's $44.02 million in cash for $1.12 a share. Total debt is $1.54 billion. Total debt to equity is 139%. Current ratio is .81. Beta is 1.04. In the last year, the stock is down 14%. There are 39.41 million shares Outstanding with a Float of 36.57 million. Insiders own 6.68% of the stock and Institutions have 71% of the Float.

Income investors need to be a little concerned about the price of gas. If it stays low or goes lower, the company's efforts in exploration and ultimately sales of this energy source will lessen. Also, there's the interest rate swap that is vulnerable to higher rates. But the company has steadfastly raised the dividend every year for decades. That says a lot about management's commitment to its shareholders.