Barron's Article Makes Positive Comments on Utility Stocks - Safe Dividends, Decent Growth
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Barron's makes comments on Utility stocks:
Some positive points include:
1) Regulated utilities trade for approx. 12x projected 2009 profits, lower than S&P 500 stock index, which is at approx. 17x.
2) Utility dividend yields average just over 5%, well above the 2.1% avg. of the S&P 500.
3) Dividends paid by the major regulated utilities look safe, and investors could see modest annual increases, enhancing the appeal of utility stocks relative to bonds.
4) Warren Buffett is a fan of the sector. One of the largest divisions within Buffett's Berkshire Hathaway (NYSE: BRK-A) is MidAmerican Energy.
5) Given Utilities' defensive characteristics, utilities are apt to hold up better than the S&P if the stock market corrects.
6) Sanford C. Bernstein analyst makes positive comments on Utility Sector, saying don't assume the group will underperform.
7) Bernstein analyst likes PG&E (NYSE: PCG) and Edison International (NYSE: EIX).
8) Citigroup analyst Brian Chin favors American Electric Power, which has one of the group's lowest P/Es.
Some negative points include:
1) Hoping to capitalize on a recovering economy, many investors are piling into "offensive" shares in the faster-growing financial, technology and industrial sectors.
2) Most equity strategists featured in Barron's cover story in our Sept. 7 issue urged investors to underweight utilities.
3) Southern Co. (NYSE: SO), American Electric Power (NYSE: AEP), Entergy (NYSE: ETR) and Exelon (NYSE: EXC) are down in 2009.
4) EDISON Int'l, Dominion Resources (NYSE: D), Entergy, Exelon, FPL Group (NYSE: FPL) and Public Service Enterprise Group , or PSE&G (PEG), are integrated utilities, which have a mix of regulated and unregulated operations. Thus, they carry more risk than regulated companies.
electric utilities, with safe and ample dividends and decent growth prospects, are good bets for investors seeking income or protection from the next slide in stocks.
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