Three years ago, I initiated a position in utility SCANA (SCG).  SCG is a regulated electric utility based in the southeast U.S.  They also own other power-generating facilities such as nuclear, coal, hydro, natural gas and solar.

I bought 80 shares at just under $50/sh.  The investment appeared to be a good one with the stock rising over 50% (to over $75/sh.) just a little over one year later.  That’s a big move for a utility, as utilities traditionally offer a large yield and small price appreciation.

Over the next year, the stock drifted lower into the high $60s.  Given that I was still nicely profitable on my investment, and collecting a healthy dividend, I didn’t see a reason to sell.

Things changed for SCG in the middle of last year though.  SCG began to trend lower with rising interest rates, but declines really accelerated as investors became increasingly worried about SCG’s investment in its new nuclear plant that continued seeing delays and cost run-ups.  In late July 2017, the nuclear project was abandoned by SCG, leaving customers with nothing to show for the increased prices they paid in their monthly bills to help fund the project.

In the last 7 months of 2017, the price of SCG fell from just over $70 to just under $40.  Quite the plunge!  I considered selling SCG at the end of 2017.

Less than 1 week into 2018, Dominion Energy (D) and SCG agreed to an all-stock merger.  This temporarily boosted SCG’s price (to just under $50), and offered to remove the uncertainty regarding what might happen to SCG.   I was happy with the prospect of becoming a D shareholder.

In February, SCG froze their dividend in what typically would have been the time for a dividend raise.  This seemed fair in light of the pending merger.  As the additional early months of 2018 passed though, doubt about the merger completion grew, and the price of SCG drifted lower again, all the way to the mid $30s.

Just recently, SCG decided to delay a declaration of their Q2 dividend (which would normally pay on 7/1).  With the thought of possibly not getting a dividend anytime soon (maybe at all), and having to rely on a merger than seemed to be more in doubt every day that passed, I decided to cut my losses and exit my SCG position.  I figure there have to be better places for my investment.

SCG

On 6/5/18, I sold my entire SCG position of 89.509 shares at $37.01/share, for a total of $3,312.69 after SEC fees.

With the sale, I realized a long-term capital loss of $1,184.99, and a short-term capital loss of $40.69.  While I’m sad to realize a loss, I’m happy to be done with the uncertainty surrounding SCG and their merger with D.  I’m also happy to not have to worry about whether or not I’m getting a dividend from SCG moving forward.

With the sale, the number of stocks in my Portfolio drops to 40, and I realize a reduction of $219.30 in annual forward dividend income.  I’ll look to re-deploy the capital obtained in the sale into another dividend-paying stock soon.  I don’t want to be without those dividends for too long!

What Now?

As a result of the SCG sale I no longer have any utilities in my Portfolio.  As you may know, I tend to lean toward higher-growth stocks for the Portfolio, as opposed to higher-yield stocks, so utilities are not high on my list of stocks to acquire.  However, it seems I should have some exposure to the Utilities sector.  If I go this route, I’m looking at possibly investing in Dominion Energy (D), the stock I would own if the merger of SCG is completed.  D shares appear to be suffering as much as SCG lately, however, I have more confidence that D would be fine compared to SCG should the deal between them fall apart.  Southern Company (SO) is also on the table for purchase.

Outside of utilities, I’m looking at initiating a position in Altria (MO) to replace SCG.  MO’s yield is close to 5%, and would go a long way in replacing a good chuck of the dividend income lost with selling SCG.  I’ve never directly owned a tobacco stock before, so I’ll have to do some additional research here.

Adding to my positions in Cardinal Health (CAH) or Comcast (CMCSA) are a possibility as well.  Both stocks have suffered in recent months.  There could be values to be had, but of course there could be more uncertain times ahead, too.

A couple of stocks from my recent watchlist, KAR Auction Services (KAR) and 3M (MMM), have moved up in price recently, so those are not in play for me here.

Would you have decided to wait and see what plays out with SCG?  What do you think of my possible replacements for SCG?  Any other stock replacement ideas you think I should consider?  I look forward to your comments!