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.

November 12, 2009 - SCANA Corp. (SCG-NYSE) engages in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. The company also purchases, sells, and transports natural gas to retail customers in South Carolina and southeastern Georgia; provides energy-related risk management services; and acquires, owns, and provides financing for nuclear fuel, fossil fuel, and emission allowances.

As of December 31, 2008, the company provided electricity to approximately 649,600 customers; and natural gas to approximately 775,000 customers. It also marketed natural gas to approximately 460,000 retail customers. Additionally, SCANA Corporation owned and operated a 500 mile fiber optic telecommunications network and Ethernet network, and data center facilities in South Carolina; and through a joint venture held interest in an additional 2,280 miles of fiber in South Carolina, North Carolina, and Georgia. The company was founded in 1924 and is based in Cayce, South Carolina.

SCANA's earnings are off this year, hurt by the recession, just like most other companies. Electric sales are down, interest expense is higher, so are the number of shares outstanding. Plus there was an negative change in pension costs. All conspire against better earnings per share (EPS). 3 analysts have a consensus estimate of $2.89 per share by the end of the year. That compares to $2.95 last year. Next year, expect $2.97.

The company is filing for higher rates on electricity and gas. It's looking to build a nuclear plant and started working on site preparation. Its regulatory body allows the company to file to recoup these costs. The total at this level is $22.5 million or a raise of about 1.1% which was implemented in late October. On the gas side, the company's Return on Equity (ROE) for its gas business is lower than allowed, down to 6.36% from the allowed ROE of 10.25%. It's looking for rate relief on that front as well and is asking for a rate hike of $13.4 million or an increase of 2.5%. That charge began in early November. These two new tariffs will help SCG achieve the projected $2.97 EPS next year.

SCANA's subsidiary, SCE&G wants to build 2 nuclear plants which would add 1.229 megawatts of capacity at a projected cost of $6.9 billion. The Base Load Review Act, the state's utility rule book, allows the company to recover the cost of the construction work in progress. No final decision on whether to complete the plant will be made until 2011. It first has to get a construction and operating license from the Nuclear Regulatory Commission.

This stock gives a good yield of 5.4%, better than the average utility. It takes about 65% of earnings to pay it. The December distribution is 47 cents, payable on January 1 for shareholders of record on December 10. The history for the last 4 years on dividends: $1.54; $1.65; $1.74; $1.82. This year, the total will be $1.87.

More numbers: Market Cap is $4.27 billion. Trailing P/E is 11.70, Forward P/E is 11.68. Price to Sales is .97 while Price to Book is 1.29. Book Value per share is $27.16. Return on Equity for the last 12 months was 11.18%. Revenue was $4.44 billion. Total cash is $103 million. Total debt is $4.51 billion. Current ratio is 1.18. Beta is a very mild .58. 52-week high was $37.62, reached on December 31, 2008 while the 52-week low was $26.01, hit on March 11, 2009. There are 123.13 million shares outstanding with a float of 110.7 million. Insiders own 9.98% of the stock. Institutions hold 45%. Value Line gives the company an A for Financial Strength.

Income investors should like this stock. It has good earnings (though this year will be a little lower than last). If the economy recovers next year, demand for electricity should increase, boosting all the above estimates a little higher. Whether the nuclear plants are finally finished due to regulatory issues will be something to watch. The company is already recapturing the developmental costs with its current rate hikes, but ultimately, nuclear would be a more efficient way to produce electricity.

Of course, the weather always plays a part in earnings for utilities. If this winter is mild and next summer is cool, those earnings will have to be adjusted downward. But then no one has ever been able to predict the weather.

- Company Web site: www.scana.com

Ted Allrich