Utility stocks are the ultimate investment for risk-averse investors seeking to create passive income streams via reliable dividends. Utility stocks can be an essential component of your portfolio as they will not only keep your income steady during dangerous economic times, they are usually the first to soar out of recessionary times.
The Utility Stocks archive below includes the latest commentary and analysis on the most important developments affecting the essential services sectors, including water, communications, energy, and other key infrastructure industries. Find out which utility stocks are poised to benefit from ongoing developments in the utility sector and which to avoid.
Be sure to also check out our free report, Dividend Blacklist: 6 Utility Stocks You Should Sell Today to find out if your dividend is in danger.
First quarter earnings aren’t all in yet, but indications are utilities are still weathering the worst recession in decades. One reason is having their strongest balance sheets since the 1960s, enabling companies to roll over debt at reasonable interest rates. Even at the height of the fall financial crisis, utilities with credit ratings of A- and higher were issuing bonds.
The telephone has been essential for decades. Even in the toughest times, service demand has continued to rise, and consumers and businesses have stayed connected and paid their bills, right along with electricity, heat and water.
Utes’ strong balance sheets kept their access to credit open even during the worst of the financial crisis, and at some of the best interest rates seen in a generation. In fact, they’ve been able to issue a record volume of new debt, even as companies in other industries have had difficulty rolling over credit lines.
Three bellwethers have reported first quarter 2009 numbers that are just as strong, if not stronger, than those posted in prior quarters. That doesn’t guarantee they’ll continue to put up high-quality numbers as long as this recession lasts, particularly if conditions should worsen. But as long as they do continue to buck this downturn, they’re in the game for an explosive recovery when conditions turn, particularly from today’s low prices.
Given the carnage of the past 21 months of market history, it’s tempting to buy into the line from the rock industry spoof This Is Spinal Tap. That is, that one can get “too much bloody perspective.” But given the financial media’s almost complete lack of it, a little now can go a very long way.
The market is now focused on demand, which is weak because of the recession and its impact on heavy industry. But that won’t last forever. And when demand revives, the supply won’t be there to meet it. In fact, producers are likely to be extremely conservative ramping up efforts to boost output and highly skeptical about how long any boost in prices will last. That’s the legacy of the disaster of the last six months, and it will be hard to erase.
As a ratepayer of Virginia Power, I don’t like paying more for electricity than anyone else does. But writing about utilities for more than 20 years--and exploring in detail their century plus history--has also made me painfully aware of how penny wise and pound foolish fighting rate increases often is for consumers.
Carbon regulation is by far the US power industry’s most important environmental issue since the 1990 Clean Air Act. Back then, the first President Bush set limits on sulphur oxide (SOX) and nitrogen oxide (NOX) emissions causing acid rain by creating a “cap-and-trade” system that allowed companies to gain time for adjustments by buying emission “credits.” Cap-and-trade’s success cutting acid rain at a relatively low cost has made it the top choice for controlling carbon, both for industry and regulators. The devil, however, is in the details.
American companies have already set a new record for dividend cuts in 2009, and we still have nine months to go. In contrast, half of the regulated US utilities tracked in How They Rate have actually raised dividends since the financial crisis broke last fall, and many of the rest look set to follow suit this spring.
Even after the catastrophic plunge in energy prices and producer stocks since summer 2008, despite almost universally gloomy forecasts for global economic growth and in spite of an apparent supply glut heading into “shoulder season,” I’m still long-term bullish on energy.