MGE Energy is a utility company that generates and distributes electricity. Besides, the company also distributes natural gas. Most of the customers for the natural gas business are residential users while most of the customers for electricity are commercial users. Coal is the main source of energy that MGE uses for electricity generation. Utility stocks like MGE Energy tend to do well when there is uncertainty and high volatility in the markets. This was exactly the case for most of the year 2020 as the pandemic wreaked havoc throughout the global economy. Investors seeking some sort of stability or high dividend yield stocks may want to look at utility companies.
Additional Information About MGE Energy
MGE Energy is a relatively small utility company. Its market capitalization was roughly $2.3 billion as of January-end 2021. In comparison, a large utility business like NextEra Energy has a market capitalization of over $150 billion. MGE Energy’s business is focused around the Wisconsin area. More specifically, the company serves customers in western and south-central Wisconsin. MGE Energy has delivered very stable business performance and has a predictable business model. Electricity demand is not very volatile and it grows at a steady rate. MGE Energy has been able to increase its dividends for over 40 years now.
MGE Energy’s stock has been somewhat flat for most of 2020 post the March market crash. It closed at $63 on 29th January 2021. The stock, at the time, was trading at a 2.32% dividend yield. The stock had grown at a reasonable rate over the previous 5 years, going from $50 levels to over $80 just before the pandemic struck. The stock has faced resistance around the $72 levels during 2020 and it will have to break out from there to start another upcycle. NextEra energy, as a comparison stock, has grown 20% during 2020. It trades at a 1.73% dividend yield after having closed at $80 on 29th January 2021.