A steady flow to utility investors Amid difficulties, NStar delivers top dividends
NStar has faced a chronic public relations problem over recurring shockings and electrocutions of dogs in Boston walking over improperly secured power lines. And complaints about frequent blackouts in several Hub neighborhoods continue to buffet the Boston utility.
But there's at least one group of people NStar is pleasing these days: Dividend-minded stock investors.
Among big Massachusetts companies, NStar was far ahead of the pack last year in paying out dividends at the rate of 4.1 percent of the year-end share price.
In fact, NStar lagged only tiny Brookline Bancorp Inc. -- parent of Brookline Bank and the former Medford Co-operative Bank -- in top dividend yield. Brookline's dividend yield was 5 percent.
NStar, which serves 1.4 million electric and gas customers in eastern Massachusetts, has continued to sweeten the deal. On Feb. 1, it increased its annual dividend by 4.5 percent, to $2.32 a year from $2.22.
NStar also plans a 2-for-1 stock split on June 3 for shareholders of record as of yesterday, which is often a sign -- but never a guarantee -- of a company that envisions its shares and dividends continuing to rise.
''We believe we can achieve a long-term earnings growth rate of between 4 and 6 percent," NStar chief executive Thomas J. May said earlier this year.
The company now pays out roughly 63 percent of its net profits as dividends, and May said he is optimistic that ''we are well positioned to provide consistent, sustainable dividend growth for investors."
Earlier this month, NStar distributed the 464th consecutive dividend paid out by it or predecessor companies such as Boston Edison Co.
NStar has increased dividends six times -- by a cumulative total of 19.5 percent -- since the 1999 merger of Edison and Commonwealth Energy that formed NStar.
NStar union representatives contend the utility has made irresponsible cuts in basic, preventative maintenance that mean it doesn't find and fix trouble spots such as the Allston location where a year-old boxer, Cassius, was electrocuted in March while walking with his 13-year-old owner. Cassius was the third Boston dog to die from electric shocks since 2000.
But Brian M. Youngberg, a senior stock analyst with Edward D. Jones & Co. LP, a St. Louis brokerage that rates NStar's shares a buy, said NStar's dividend payout is lower than many similar utilities, a reflection that it is conserving some cash to build a $200 million underground transmission line from Stoughton to South Boston.
While 30 US utilities have had to cut dividends in the last three years, Youngberg said he agrees with May that ''NStar should be able to raise its dividend at a 4 or 5 percent rate going forward. That's a very positive attribute it can offer investors."
Peter J. Howe can be reached at howe@globe.com. 