In upgrading American Electric Power to Buy from Hold last month, UBS analyst Shalini Mahajan wrote that the stock was trading too cheaply relative to other coal-heavy utilities like Southern and Duke. Mahajan has a price target of 48, just below Gordon's target of 50.

PG&E, which serves Northern California, has one of the better growth outlooks among traditional regulated utilities. It projects annual growth in earnings per share of 8% over the next few years. The company is expected to earn $2.96 a share this year and $3.25 in 2009, and has a dividend yield of 4%. It trades for $38 a share, and Gordon has a price target of 46.

Within the electric sector, Citigroup's Gordon favors companies like American Electric Power, PG&E, CMS Energy and Wisconsin Energy, which have relatively low dividend yields, low dividend-payout ratios and good earnings prospects. The dividend-payout ratio is the percentage of profits paid out in dividends.

Within the electric sector, Citigroup's Gordon favors companies like American Electric Power, PG&E, CMS Energy and Wisconsin Energy, which have relatively low dividend yields, low dividend-payout ratios and good earnings prospects. The dividend-payout ratio is the percentage of profits paid out in dividends.

Citi's Gordon notes that smaller-cap utilities, like Kansas-based Westar Energy and Michigan's CMS Energy, have been hit harder than larger companies. Westar, at 23, trades for 15 times estimated '08 profits, but only 11.6 times '09 projections of $1.95 a share. Westar has one of the rosiest profit outlooks in the regulated-utility sector for the next few years, as heavy capital spending ends.

Citigroup's Gordon is less excited about stocks like Southern Co. and Duke, which have high dividend-payout ratios.

Citigroup's Gordon is less excited about stocks like Southern Co. and Duke, which have high dividend-payout ratios. Southern, with a high dividend-payout ratio of almost 70%, trades at 15 times projected 2009 profits, while American Electric Power and PG&E, with payout ratios of about 50%, have 2009 P/Es of around 12.