It’s no secret that many investors love utilities stocks because they are stable performers, regardless of the economy. After all, you can bike or bus to work, swap that pricey latte for a basic cup of Joe and nosh on ramen – but you still need to keep the lights on.
Utilities are less volatile because they are regulated monopolies and can pass on increased costs to customers. Regulators still have to approve rate hikes, but those requests seldom are denied.
Utility stocks offer many other attractive perks as well: they pay out nice dividends, don’t suffer wild price fluctuation and still offer conservative growth. That makes the right utilities that rare blend of strength, stability, income and growth that investors can hold for a long time.
Here are five good names to consider for your portfolio:
Duke Energy (NYSE:DUK): Charlotte, N.C.-based Duke Energy generates electricity in the Carolinas and the Midwest and offers natural gas distribution services in Ohio and Kentucky. The company has announced plans to acquire its neighbor, Raleigh, N.C.-based Progress Energy (NYSE PGN), in a $13.7 billion deal. If regulators approve the acquisition, the combined company would become the largest power company in the U.S., with more than 7.1 million electricity customers in the Carolinas, Florida, Indiana, Kentucky and Ohio. Duke is trading 3.4% above its 50-day moving average and has a dividend yield of 5.3%.
Empire District Electric (NYSE:EDE): Empire is a Missouri-based utility providing electric, natural gas and water service to about 215,000 customers in Missouri, Kansas, Oklahoma and Arkansas. Empire also offers fiber optic services. Rate increases were responsible for raising revenues in the company’s electric segment by nearly 13% over the prior year. Empire has a 5.7% dividend yield and is trading nearly 4% above its 50-day moving average.
Brookfield Infrastructure Partners (NYSE:BIP): Brookfield owns and operates utilities, transport and energy, and timber assets around the world. Similar to a real estate investment trust, Brookfield uses funds from operations (FFO) to report cash flow. The company’s utilities segment generated FFO of $144 million in 2010. Brookfield has a 5.3% dividend yield and is trading more than 5% over its 50-day moving average.
Pepco (NYSE:POM): This company is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 1.9 million customers in D.C., Delaware, Maryland and New Jersey. The company recently took a hit over frequent, wide-ranging and prolonged outages from winter storms. Even so, PEPCO is trading more than 5% above its 50-day moving average and has a dividend yield of 5.6%.
First Energy (NYSE:FE): The Ohio-based utility has had to deal with outages from the intense spring storms that have pummeled the Midwest. First Energy’s 10 electric distribution companies generate and deliver electricity, natural gas, clean coal and renewable energy to 4 million customers. The company’s stock is trading nearly 5.7% above its 50-day moving average and has a dividend yield of 5.5%.
Bottom Line: All of these stocks have strong fundamentals and pay healthy dividends. They’re also trading above both their 50-day and 200-day moving averages – a dynamic that can indicate a long-term uptrend. So while these utility stocks are not going to give you the wild ride of many tech stocks and small-caps, they’re solid, conservative investments that can give good returns with lower risk.
As of this writing, Susan J. Aluise did not old an interest in any of the stocks mentioned here.