Energy utilities are purveyors of a necessity, usually at government-regulated prices and restricted competition. Due to utility distribution regulations, they are considered generally reliable and predicable businesses, though issues such as the recent renewed concern over nuclear power can occur, as well as market volatility.
Nonetheless, the regulated nature of their businesses tends to make utility dividends reasonably secure, and also designate the equities as classic "widow and orphan" stocks. Their relative security means that the dividends and equity are unlikely to grow at a rapid pace.
Investors looking to double their money in a year or two will rarely look at a utility. Utilities are also generally far less volatile than the broader market, and the demand for utilities only increases over time, as technology advances into new realms and the population continues to grow.
Below are six large cap (over $10 billion) energy utilities within the S&P 500 [Consolidated Edison (ED), Entergy Corporation (ETR), PG&E Corp. (PCG), PPL Corporation (PPL), Public Service Enterprise Group (PEG), Xcel Energy Inc. (XEL)]. I have also included their one-month, three-month, six-month and 2011-to-date equity performance rates (not including dividends paid).
Below is a 2011-to-date comparison chart (click to enlarge):
Several Utilities ETFs are also available, such as the Utilities Select Sector SPDR (XLU) that currently yields 3.88 percent. Additionally, the iShares Global Utilities ETF (JXI) tracks the S&P Global 1200 Utilities Index.
Recent strong performance by most utilities, particularly within the United States, may also indicate that these utilities are overbought in the short-term. Nonetheless, their yields are still well above the broader market's average.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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