Utilities Not So Boring After All

Do you think that utility stocks are boring? Consider this. As of June 30, Fidelity MSCI Utilities, an index that tracks the performance of U.S. utilities, had returned 18 percent for the year, triple the S&P 500's 6 percent gain for the same period. With the economy expected to strengthen in upcoming months, some pundits advise that it's too late to buy utilities. They say that utilities underperform in a strong market. Not so. My research found that, as a group, utilities typically keep up with the S&P 500 in strong markets. But what if the consensus view is wrong and instead of growing, the economy tanks? Sure, utility stocks will drop with the overall market. But most pay relatively high dividends. Further, because they produce steady and predictable cash flows, dividend cuts are rare. Thus, you'll still receive regular dividends while you wait for a recovery.

My screen listed five utilities when I ran it on Wednesday. One Emera (EMRAF), a Canadian utility, doesn't trade enough shares on U.S. exchanges to be a viable candidate. Here are the remaining four: Duke Energy (DUK), which is paying a 4.3 percent expected yield, Empire District Electric (EDE), 4.1 percent yield, Hawaiian Electric Industries (HE), 4.9 percent yield, and PPL Corporation (PPL), 4.3 percent yield. As always, consider the screen results to be research candidates, not a buy list. The more you know about your stocks, the better your results.

Source: Santa Cruz Sentinel

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