Description  |
Shortcomings  |
DCF Cost of Equity
The following table calculates an indicative DCF cost of equity using historical dividend growth for "g" in the single stage DCF model:
Company Name |
Stock Price 01/29/99 |
Annual Dividend |
Dividend Yield |
5-Yr. Historical Div. Growth (1) |
Ke Using Hist. Div. DCF |
Allegheny Energy |
31.63 |
1.72 |
5.44% |
1.0% |
6.44% |
BEC Energy |
38.25 |
1.88 |
4.92% |
3.0% |
7.92% |
Baltimore G&E |
27.25 |
1.68 |
6.17% |
2.5% |
8.67% |
CMS Energy |
42.81 |
1.32 |
3.08% |
17.5% |
20.58% |
Carolina P&L |
41.63 |
1.94 |
4.66% |
3.5% |
8.16% |
Central & S.W. |
26.44 |
1.74 |
6.58% |
3.5% |
10.08% |
Cen. Hudson G&E |
40.31 |
2.16 |
5.36% |
2.0% |
7.36% |
Cinergy Corp. |
31.31 |
1.80 |
5.75% |
1.5% |
7.25% |
Consolidated Ed |
49.44 |
2.12 |
4.29% |
2.0% |
6.29% |
DPL, Inc. |
18.94 |
0.94 |
4.96% |
4.0% |
8.96% |
DQE, Inc. |
39.44 |
1.44 |
3.65% |
6.0% |
9.65% |
DTE Energy |
40.56 |
2.06 |
5.08% |
2.0% |
7.08% |
Duke Power |
61.81 |
2.20 |
3.56% |
4.5% |
8.06% |
Edison Intn'l |
27.81 |
1.04 |
3.74% |
-6.0% |
-2.26% |
Energy East |
51.19 |
1.60 |
3.13% |
-8.0% |
-4.87% |
FPL Group |
54.88 |
2.00 |
3.64% |
-5.0% |
-1.36% |
FirstEnergy |
31.06 |
1.5 |
4.83% |
-1.0% |
3.83% |
Fla. Progress |
41.63 |
2.14 |
5.14% |
2.0% |
7.14% |
GPU, Inc. |
42.63 |
2.06 |
4.83% |
6.0% |
10.83% |
Hawian Elect. Ind. |
37.44 |
2.48 |
6.62% |
1.5% |
8.12% |
IPALCO |
49.75 |
1.1 |
2.21% |
1.0% |
3.21% |
Illinova |
24.438 |
1.24 |
5.07% |
23.5% |
28.57% |
Interstate Energy |
28.94 |
2.00 |
6.91% |
2.0% |
8.91% |
Kansas City P&L |
28.31 |
1.66 |
5.86% |
3.0% |
8.86% |
LGE Energy |
26.38 |
1.23 |
4.66% |
3.5% |
8.16% |
MidAmerican Energy |
26.81 |
1.20 |
4.48% |
-3.5% |
0.98% |
Minnesota Power |
40.44 |
2.04 |
5.04% |
1.5% |
6.54% |
Montana Power |
52.5 |
1.6 |
3.05% |
1.5% |
4.55 |
NIPSCO Ind. |
27.13 |
0.96 |
3.54% |
8.0% |
11.54% |
New Century Energies |
44.00 |
2.32 |
5.27% |
1.0% |
6.27% |
New England Elect. |
48.94 |
2.36 |
4.82% |
2.5% |
7.32% |
Northeast Utilities |
15.31 |
0.00 |
0.00% |
-8.5 |
-8.50 |
Northern States Power |
26.94 |
1.43 |
5.31% |
2.5% |
7.81% |
OGE Energy |
25.31 |
1.33 |
5.25% |
0.5% |
5.75% |
Orange & Rockland |
56.75 |
2.58 |
4.55% |
1.5% |
6.05% |
PECO Energy |
38.19 |
1.00 |
2.62% |
5.5% |
8.12% |
PP&L Resources |
26.69 |
1.00 |
3.75% |
1.5% |
5.25% |
PacifiCorp |
20.56 |
1.08 |
5.25% |
-6.0% |
-.75% |
Potomac Electric Power |
23.31 |
1.66 |
7.12% |
1.5% |
8.62% |
PS Enterprise Group |
39.56 |
2.16 |
5.46% |
0.5% |
5.96% |
SCANA Corp. |
27.69 |
1.54 |
5.56% |
2.5% |
8.06% |
SIGCORP Inc. |
32.63 |
1.21 |
3.71% |
3.0% |
6.71% |
Southern Co. |
26.94 |
1.34 |
4.97% |
3.0% |
7.97% |
TECO Energy |
23.25 |
1.24 |
5.33% |
5.5% |
10.83% |
Texas Utilities |
43.94 |
2.20 |
5.01% |
-5.0% |
0.01% |
Unicom Corp. |
35.63 |
1.60 |
4.49% |
-10.5% |
-6.01% |
UtiliCorp |
35.00 |
1.80 |
5.14% |
2.5% |
7.64% |
WPS Resources |
32.75 |
1.98 |
6.05% |
2.5% |
8.55% |
Western Resources |
31.44 |
2.14 |
6.81% |
1.5% |
8.31% |
Wisconsin Energy |
26.00 |
1.56 |
6.00% |
4.0% |
10.00% |
Avg./ DCF Cost of Equity |
N/M |
N/M |
4.77% |
1.89% |
6.66% |
(1) Source: Value Line, January, 1999
The following table calculates an indicative DCF cost of equity using projected earnings growth for "g" in the single stage DCF model:
Company Name |
Stock Price 01/29/1999 |
Annual Dividend |
Dividend Yield |
5-year Projected (2) EPS Growth |
Ke Using Proj. EPS DCF |
Avg./ DCF Cost of Equity |
N/M |
N/M |
4.77% |
5.36% |
10.16% |
(2) Source: Value Line, January, 1999
This last table calculates an indicative DCF cost of equity using the 2-stage model with projected earnings growth for "gs" and EIA(3) GDP growth for "gl":
Company Name |
Dividend Yield |
First Stage Growth |
Second Stage Growth |
Compound Average Growth |
Ke Using 2-Stage DCF |
Avg./ DCF Cost of Equity |
4.77% |
5.36% |
5.02% |
5.11% |
9.88% |
(3) Source: Energy Information Administration Annual Energy Outlook 1998

Updated on 9/15/98
paulconsul@aol.com