DTM - DTE Energy: Common Shares Are Overvalued Consider The High-Yield Baby Bonds Instead

2024-05-13 10:14:44 ET

Summary

• DTE Energy Company is the largest utility in Michigan with four subsidiaries, including DTE Electric and DTE Gas.
• The company has a history of above-average dividend growth and currently offers a yield of 3.5%.
• DTE Energy is transitioning to renewable energy and has plans to retire aging coal plants and invest in solar and wind. This transition will be the source of future growth.
• The company has three series of baby bonds paying over 5.6%, alternatives to money-markets and today's lower yield on the common shares.

DTE Energy (DTE) is the largest utility in the State of Michigan, incorporated in 1995. Its four wholly-owned subsidiaries are DTE Electric (founded in 1903 as the Detroit Edison Company), DTE Gas (founded in 1849 as City of Detroit Gas), DTE Vantage, and DTE Energy Trading (started in 1998). Vantage operates renewable natural gas projects and provides energy consulting services. DTE Electric has 2.3 million customers in southeast Michigan, which includes the City of Detroit. DTE gas has 1.3 million customers spread across the state. Electricity operations usually provide 50% of net income, gas about 19.0% and DTE Vantage and Energy Trading a not insignificant 31%. Standard & Poor’s rates DTE Energy debt as BBB, or lower medium investment grade. The company has a total market cap of $24.0 billion, and according to Edison Electric Institute, it is the fourteenth largest investor owned utility in the US....

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