A Clean Energy Play - PPL Corporation (PPL)

Few investors would argue with a share which offers a dividend yield of 5.4% and is sitting on a forward price to earning (PE) multiple of 8.

However that is what is on offer for investors in energy utility PPL Corporation (PPL).

In 1920 following the merger of eight power utilities serving central and eastern Pennsylvania, the Pennsylvania Power & Light Co. (PPL) was formed. By 2010 the company controlled or owned nearly 12,000 megawatts of generating capacity in the United States, selling energy in major U.S. markets, and delivering electricity to about 4 million customers in Pennsylvania and the United Kingdom.

Apart from existing infrastructure the company has recently broken ground on a $434m expansion project of its Holtwood Hydroelectric power operations. This initiative will add 125 megawatts of generating capacity that will provide enough renewable, environmentally friendly electricity to power 100,000 homes in the area. The Federal Energy Regulatory Commission (FERC) has extended the operating license of PPL (PPL) in the region for another 16 years adding to the sustainability of the company.

In a nutshell: strong existing infrastructure as well as exposure to clean energy including hydro-electric power is a compelling investment.

PPL (PPL) also has a consistent dividend record and since 1987 has been steadily raising its dividend.

Reporting first quarter results in May, the company showed an increase in first-quarter earnings for 2010, compared with the same quarter of 2009 and reaffirmed its earnings outlook for the rest of 2010. Earnings in the quarter were $0.66 per share, up from $0.64 per share a year ago and indicating that it expected to earn between $3.10 and $3.50 per share from ongoing operations.

Although declining energy prices, lower electricity demand and lingering economic uncertainty present continuing challenges for the sector, the company reiterated its 2010 forecast of earnings from ongoing operations. The business will also benefit from wholesale energy prices that were contractually hedged in prior years at prices higher than current forward prices.

Clean energy is likely to be a major theme for developed economies over the coming years. Investors looking to participate in this trend and still enjoy a strong dividend would do well to consider PPL (PPL) for their portfolios.