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.

January 19, 2011 - Westar Energy (WR-NYSE) an electric utility company, is in the generation, transmission, and distribution of electricity. It produces electricity through various sources, including coal, wind, nuclear, natural gas or oil, and diesel.

It had 6,807 megawatts of generating capacity; and approximately 6,200 miles of transmission lines, 23,800 miles of overhead distribution lines, and 4,200 miles of underground distribution lines. The company also engages in energy marketing and in the purchase and sale of electricity. Westar Energy was founded in 1924 and is headquartered in Topeka, Kansas.

Revenues and earnings are set to show a solid rebound for 2010. Sales in 2009 were $1.858 billion, up from $1.839 billion in 2008. For last year, 8 analysts have a consensus estimate of $2.04 billion, then see $2.10 billion in 2011. Because 2010 experienced a relatively robust growth in sales, comparisons in 2011 will be more challenging.

For earnings, they're predicting $1.86, well above the $1.28 reported in 2009 which was down from $1.31 in 2008 which was down from $1.84 in 2007. The trend seems to be broken for this year at least. Next year, 11 anlaysts expect $1.76 as their consensus estimate with a range of $1.63 to $1.90. If that one analyst at the high end is correct, then the upward trend will continue.

As for the dividend, it finished at $1.23 for 2010. That was above the $1.19 of 2009 and the $1.14 of 2008 and the $1.06 for 2007 and the 98 cents in 2006. This trend seems intact, and if the company continues to pay the 31 cents per quarter it's now sending out, investors should receive at least $1.24 in 2011. The yield is 4.8%. Dividends are paid in early January, April, July and October. Last payment was January 2.

Third quarter earnings (completed October 31, 2010) were indicative of the new strength at Westar. Retail sales were higher, compared to the same quarter the previous year, due to favorable weather and the beginnings of an economic recovery in some industrial areas. That recovery seems to be holding and should improve, suggesting even better numbers going forward. There will be some higher costs in the short term and one major customer, a large oil pipeline firm, has delayed its start up of electricity usage from WR. When that switch is flipped on, expect higher sales and profits.

The company issued 7.5 million shares of stock in November at $25.54 a share. Most of the money was used to pay off short term debt that was used for investments in electric utility infrastructure. The rest was for general corporate purposes.

More numbers: Market Cap is $2.87 billion. Trailing P/E is 13.79 and Forward P/E is 14.67. Price to sales is 1.82 and Price to book is 1.21. Book value is $21.49. Operating margin for the last 12 months was 23.85% and Profit margin was 10.30%. Return on equity was 8.93% and Return on assets was 3.94%. Total cash is $4.47 million or 4 cents a share. Total debt is $2.94 billion. Debt to equity is 123% of equity. Current ratio is 92 cents. Beta is .64. The stock isup 15% over the last 52 weeks. There are 111.39 million shares outstanding with a Float of 110.54 million. Insiders own .63% and Institutions have 69.50% of the Float.

Income investors may get a bonus with this stock: capital appreciation. With a stronger economy, WR should see increased demand for power. New investments in transmission projects will help meet that demand. Expect this stock to continue paying a decent dividend and if the earnings continue to improve, the price should as well.

- Company Web site: www.westarenergy.com

- Ted Allrich