Hotfoot Teddy was not having a good day.
Firefighters saw the 3-month-old black bear cub wandering into the path of the 1950 Capitan Gap wildfire in New Mexico.
His mother was nowhere to be found.
After the firestorm passed, they found him clinging to a tree with minor burns on his feet… but miraculously alive.
A local rancher took in Hotfoot Teddy and cared for his injuries. The U.S. Forest Service later adopted him and renamed him Smokey the Bear. He became the living symbol of fire prevention for more than 25 years.
Smokey being treated for his injuries
Source: U.S. Forest Service
Wildfires are a threat to many people’s health and property.
In recent weeks, smoke from wildfires in Canada has blanketed the northern U.S., choking major cities with hazardous air quality.
According to the National Parks Service, 85% of wildfires are caused by humans. Common reasons include campfires, cigarettes, equipment malfunctions, and arson.
Fortunately, Smokey may be getting some help in preventing wildfires from an unexpected source – artificial intelligence (“AI”).
Today I’ll show you how utility companies are adding AI to their services to prevent mistakes like forest fires. I’ll also show you how these new technologies can help secure steady-growing dividends for income investors like us.
AI Is Now Preventing Forest Fires
The 2018 Camp Fire was the most devastating wildfire in California. It killed at least 85 people and destroyed $16.5 billion of property.
And it could have been stopped.
A faulty transmission line owned by Pacific Gas and Electric (PCG) sparked the fire. The company had been slow in fixing problems with its equipment – sometimes waiting for years before addressing known issues.
The liabilities from the Camp Fire sent the utility into bankruptcy.
Since then, Pacific has started to modernize. In 2021 the company deployed Palantir’s (PLTR) Foundry software to make sense of the 8-10 billion pieces of data it gets every day.
The software is powered by AI. It helps the company get a complete picture of its grid, so it can do preventative maintenance and enhance safety.
The new technology automatically shuts off power when it detects a problem and helped reduce fires related to power lines by 68% last year.
The company is also using drones and computer vision to automate inspections of its power lines.
It’s also using AI to process data from wildfire cameras. That helps firefighters figure out where fires are burning and send out automatic warnings to customers.
Other utilities are also deploying AI to improve efficiency on the power grid and help with customer service.
Consolidated Edison (ED) is using a platform from C3.ai (AI) to measure demand from smart meters and adjust the amount of power it produces to reduce wasted energy.
This helps the company – and its customers – save more than $850 million every year.
AI’s Amping Up Dividends
So how does AI help utilities earn more money?
Unlike normal companies, utilities don’t get to keep the extra profits when they save money. That’s all passed on to their customers in the form of lower rates.
Instead, every few years, they must file a “rate case.” Utilities must justify their spending and ask regulators for a reasonable rate of return on their investments.
More states are adopting laws that regulate utilities based on their performance. By using AI to lower energy costs and keep the power grid safe and reliable, utilities meet their performance targets and keep their customers happy.
Happy customers lead to happy regulators… who are likely to allow more investments and higher rates of return. That translates to better earnings and more dividends for shareholders.
Last week, I showed you why utilities are set to benefit from an increased demand for infrastructure and more government funding to help them build it.
And new technologies like AI will help utilities build, operate, and maintain the grid more efficiently.
Here are three utilities that still look attractive today – and how they’re using AI to improve lives and make money for shareholders:
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Entergy Corporation (ETR) is using AI to predict the growth of trees close to power lines that need to be trimmed.
It yields 4.4% and has increased its dividend 8 years in a row. Shares trade at 14.5x earnings. This is its lowest valuation since the pandemic.
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Sempra (SRE) is using machine learning to manage renewable power and improve grid efficiency 240 times faster than traditional systems.
It yields 3.3% and has grown its dividend for 20 years. It trades at 16x earnings compared to an average of 19x over the past decade.
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American Electric Power (AEP) is using AI to predict customer bills and alert them on ways to save money.
It yields 3.9% and has a 13-year dividend growth streak. It trades at 16x earnings compared to an average of 18x over the past decade.
Through the power of AI, not only can utility companies save lives and animals like Hotfoot Teddy… But you can also boost your income from their success.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
P.S. For more in-depth research on our best income plays right now – including my favorite opportunity set to profit from another recession-resistant, mission-critical business – check out Intelligent Income Investor. I just put together a special presentation on this opportunity that can help you set up your own income “royalty” stream today.