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Electric utility stocks offering attractive yields. Time to invest?

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I'm tempted by today's attractive yields on electric utility stocks such as Duke (DUK) and Dominion (D). I can't recall the kind of volatiity they're now showing since the nuclear power plant scares of the 1970s. Is this a case of margin buyers being forced to sell anything they can sell at distressed prices, or is there a serious question about collecting from customers?  Their yields look good and these utilities have shown a record of increasing their dividends. What's not to like?

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Re: Electric utility stocks offering attractive yields. Time to invest?

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@Retired1809  The Vanguard and iShares are both solid utility funds, but I have gone in a slightly different direction with Franklin Utilities (FKUQX).  Normally I would go with a higher dividend fund, but I like the overall track record and total return of the fund, and I also like the low portfolio turnover.  

This is a no-load edition of their long-time utility fund, FKUTX, so you might want to look at that ticker to get a better sense of their longer term record.  

Seems to me like it would be hard to go too far wrong with any of the funds.  

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Re: Electric utility stocks offering attractive yields. Time to invest?

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I'm buying.  I am not an expert in the sector, so I prefer to hedge my bet by buying a fund vs. individual utilities.  Before the crash, I thought the sector was overpriced vs. most other sectors, but the price is a lot more attractive now.  To me, regulated utilities are a pretty good bond proxy, what with interest rates being so low.  

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Re: Electric utility stocks offering attractive yields. Time to invest?

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If you like the "fund" approach, do you like Vanguard's Utility ETF?  Or another fund?  I can't immediately remember the symbol. But I'm going to compare it with Vanguard's High Yield Dividend ETF VYM containing a diversified portfolio of high yield stocks. Thanks.

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Re: Electric utility stocks offering attractive yields. Time to invest?

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@Retired1809  The Vanguard and iShares are both solid utility funds, but I have gone in a slightly different direction with Franklin Utilities (FKUQX).  Normally I would go with a higher dividend fund, but I like the overall track record and total return of the fund, and I also like the low portfolio turnover.  

This is a no-load edition of their long-time utility fund, FKUTX, so you might want to look at that ticker to get a better sense of their longer term record.  

Seems to me like it would be hard to go too far wrong with any of the funds.  

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Re: Electric utility stocks offering attractive yields. Time to invest?

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Thanks, mlott. Good suggestions.

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Re: Electric utility stocks offering attractive yields. Time to invest?

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Do you guys have data showing how utilities performed in the 60s and 70s during rampant inflation?  I am trying to understand why utilities are getting hammered.   YTD both VPU and SPY have lost exactly the same amount.  May be the trillions of deficits are spooking folks about excessive supply of bonds and the potential for yields jumping up.

At current prices and last year dividends, VPU yields 4%.  

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Re: Electric utility stocks offering attractive yields. Time to invest?

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Vanguard's VPU has the same p/e as the 500 index, which I think means by historical standards, it's still not cheap.

Of course, maybe this time is different.

Sorry to be a bummer.

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Re: Electric utility stocks offering attractive yields. Time to invest?

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@Anitya wrote:

Do you guys have data showing how utilities performed in the 60s and 70s during rampant inflation?  I am trying to understand why utilities are getting hammered.   YTD both VPU and SPY have lost exactly the same amount.  May be the trillions of deficits are spooking folks about excessive supply of bonds and the potential for yields jumping up.

At current prices and last year dividends, VPU yields 4%.  


Utilities are being hammered because a lot of investors and hedge funds sold utility stocks to meet margin calls or panicked and sold off index funds , dividend funds and balanced funds holding utility stocks to get out of equities. 

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Re: Electric utility stocks offering attractive yields. Time to invest?

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I bought PPL when it hit 7% yield.  I am a buy and hold investor and I'm pretty happy with 7% if they hold their dividend. 

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Re: Electric utility stocks offering attractive yields. Time to invest?

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I'm not sure why some of them have sold off??? Recession risks? Several others have raised possible risks above. Granted, they were overpriced, prior to the Covid19 virus, but they are now at least "fair value" if not a little below fair value. There may be anticipation that some of them will be hit "financially" if loads of people are laid off, and can't pay their utility bills.

I have added to my position in  DUK, have a low ball order in for more D (Dominion energy), and am watching SO, which I already own. I also own AEP, which is another solid Utility, but it is a little pricey still. 

Win
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Re: Electric utility stocks offering attractive yields. Time to invest?

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@Win1177 wrote:

I'm not sure why some of them have sold off??? Recession risks? Several others have raised possible risks above. Granted, they were overpriced, prior to the Covid19 virus, but they are now at least "fair value" if not a little below fair value. There may be anticipation that some of them will be hit "financially" if loads of people are laid off, and can't pay their utility bills.

I have added to my position in  DUK, have a low ball order in for more D (Dominion energy), and am watching SO, which I already own. I also own AEP, which is another solid Utility, but it is a little pricey still. 


Utilities sold off in the last week or so because many investors had to meet margin calls and hedge funds and ETFs had to raise cash because investors redeemed the funds. Utility stocks also sold off during the 2008-9 financial crisis as investors pulled out of equities without regard to whether the sector was affected by the meltdown in mortgage derivatives.

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