Published: October 27, 2009

Every time you pay your electricity or gas bill, someone just like you is taking a cut. It’s not just executives at your local electric company that benefit from your power usage.

Regular investors can actually take a cut of every single bill payment you and your neighbors make. Today, we’ll show you how... and give you three small-cap plays you need to get into right now...

When embattled in a game of Monopoly, the three sets of properties we typically shoot for are Boardwalk and Park Place, the railroads and the utilities. Why would Parker Bros. make such a fuss over these three assets?

Well, luxury real estate like the dark blues is typically lucrative. In today’s world, however, that probably isn’t your best bet.

How bout the railroads? Owning transportation and shipping systems is always a profitable venture. But with competition from cheap air cargo and trucking, railroads just don’t have the appeal they once did.

That leaves the utility companies. If you can own the transfer of water or electricity, chances are you’ll make a pretty penny. That’s why we’re big proponents of utilities.

These companies can pay such high dividends because they make so much money off the growing demand for natural gas, electricity and even water.

But why is now the best time to load up on utilities? Because they are as recession proof as it gets.

Time to Take a Trip on the Electric Avenue
Josh Peters of Morningstar writes, “Even during recessions, people have to heat their homes, take showers and keep that TV set aglow.” Even if television doesn’t sound like a necessity, try telling that to the majority of Americans. While ad revenue has crashed in the last 12-18 months, TV viewership is as steady as before... if not better.

While we think natural gas is the investment you need to make right now, electricity is the easiest and most lucrative. You see, the average American will actually use more electricity during recessions... a lot more time spent in their living rooms watching TV and surfing the Web.

Sure, industry has slumped a considerable amount. But electricity companies have seen only a nominal drop in revenue, most of which is already factored in. Meanwhile, they are paying larger and larger dividends.

When looking for an electric utility, the No. 1 characteristic to seek out is cash flow. The more cash running through a company, the better. You also have to consider whether the company is taking steps to curb spending. Today’s we have three small-cap utilities that have done expert jobs of both.

Buy These Three to Shore Up Your Income Portfolio
First up is UIL Holdings Corp (NYSE: UIL). UIL is an electric utility in New Haven, Connecticut. The company has a solid customer base of nearly 325,000. Only 5.6% of its revenue comes from industrial businesses, which helped the company escape the last market collapse relatively unscathed.

But the best part about UIL is its dividend. The company has paid out its income to shareholders dating back to 1977. Over that period, its dividend grew considerably. Now you can get a solid, consistent 6.3% dividend yield, without worrying about where the stock goes. You can’t get that with a savings account.

Next is NorthWestern Corp (NYSE: NWE). With both electricity and natural gas operations, the company has over 650,000 customers in South Dakota, Montana and Nebraska. NorthWestern has little-to-no competition in its operating region, which makes it a true semi-monopoly.

While it’s only been paying dividends for a little over a year, the company has already raised its payments to 34 cents per quarter. That works out to a solid 5.4% yield. Now is the time to lock in this growing income.

Finally, we found Empire District Electric Co (NYSE: EDE). Empire generates, transmits, and distributes electricity in Kansas, Oklahoma, Arkansas, and its home state of Missouri. While the company’s stock is a bit more volatile than others, it does offer another upside most don’t.

Empire also has water operations in various places in Missouri. This could become a lucrative business, as the cost of water continues to skyrocket.

Empire’s 7% dividend yield is enough to give it a serious look. High yielders like this don’t come along too often. We suggest you jump on it.

All three of these should be consistent income generators for years to come. If you are worried about a second market drop, or you just want to get your share of your neighbor’s energy bills, these are your best bets.

After all, where else can you get safe income in this market?

-- Jim Nelson
Managing Editor
Penny Sleuth

Editor's Note: This article originally appeared in Penny Sleuth.