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.
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.
Bear market rally or the real thing? That seems to be the question on the mind of every investor I’ve talked to recently.
There are plenty of arguments to be made on both sides. Stocks of companies that are resisting this recession and paying big dividends are selling at valuations typically seen at bear market bottoms. Sentiment has improved over the past week but is still the gloomiest on record, again a classic bottom sign.
In the end, the best chance of passing CO2 regulation in this Congress rests with the Illinois “mafia,” the home staters favorite son Obama brought with him to the White House. The most powerful of these--Chief of Staff Rahm Emmanuel--has already succeeded once in advancing coal interests, inserting record funding for clean coal technology development in the stimulus package.
Market history shows that such emotional lows and rock-bottom valuations for quality companies also resolve in surging prices. And that’s a pretty key fact to keep in mind when the market action gets as wild and wooly as it has over the past couple of weeks.
Thanks to six years-plus of slashing operating risk and debt, utilities have been an island of strength in these troubled times, which have shaken icons in other industries to their cores. But even essential service companies have suffered some casualties in this bear market.
Customer complaints against regulated utilities are on the rise across the nation. That’s typical for recessions, but it could spell trouble for some utilities looking for rate increases, particularly if they really need the capital.