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Follower ○○

Re: Who's Buying Utilities?

I have 1 st share of D 30 years ago, I have a good size of D, they will cut their dividend in 4 th quarter, I will think about it. I still add DUK, SO and PPL from time to time

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Frequent Contributor

Re: Who's Buying Utilities?

Also beware of regulated utilities with a high percent of sales to Commercial and Industrial, as they will likely be the most adversely affected by the economic slowdown and their dividends at the greatest risk. But as long as their debt load is ok, others may look at this as a value buying opportunity for those providing power to C&I.

BruceM

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Explorer ○○

Re: Who's Buying Utilities?

Duke flat pre-market.

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Contributor ○

Re: Who's Buying Utilities?

Good thread - without politics and polite sharing.  Utilities are too much work for me but enjoyed the posts.

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Frequent Contributor

Re: Who's Buying Utilities?

I never bought utilities.  Jeffrey Saut of Raymond James has decades of experience with utilities and doesn't like them.  Good enough for me as Jeffrey is much smarter than me.  I never bought preferreds either.  You can't dance with all the ladies.  I use REITs and BDCs

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Re: Who's Buying Utilities?


@Anitya wrote:

Utilities are too much work for me but enjoyed the posts.


Why work? I thought they were traditionally considered “widows’ and orphans’” stocks because they are more or less “sleep easy” to own. I suppose now all dividend payers need to be examined for sustainability, but even so, I would think utilities would be less work than momentum stocks.

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Follower ○○

Re: Who's Buying Utilities?

In stock market, I just use fundamental analysis concept, not momentum, with D, they merged with Dominion midstream energy LP for 0.25 per share of D at 75 dollars, they will sale for 9.7B include 5.7B of debt, so they have 4B left, repurchasing plan is 3B in 4 quarter, 1 B left for whatever they plan to do in the future and 33% dividend cut in 4 quarter. I will look at share reduce and their forward income and balance sheet. When I invest into a company, I consider I am a partial owner.

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Participant ○○○

Re: Who's Buying Utilities?


@PaulR888 wrote:

I never bought utilities.  Jeffrey Saut of Raymond James has decades of experience with utilities and doesn't like them.  Good enough for me as Jeffrey is much smarter than me.  I never bought preferreds either.  You can't dance with all the ladies.  I use REITs and BDCs


I love Jeff Saut.  While I wouldn't invest in regulated utilities in all regulatory regimes (the era of deregulation was a disaster) utilities seemed much more manageable to understand and invest in to me.  

Alas, I didn't properly account for environmentalist irrationality and the degree to which it has infected the minds of seemingly every member of the managerial, administrative, and judicial class, as well as all the brainwashed young who think we get power by praying to the Lorax or something.

BDCs are too risky for me.  Full stop. 

I dumped my REITs in early March because of the sudden stop.  2 of the four I sold have since cut their dividends about 50%, still waiting on the other 2 and for Covid to finish its world tour.

Old folks looking for returns are looking at a pretty unfavorable landscape.  Now approaches a new regime of higher taxes, regulation, and stagflation at best likely beginning next January.  Plus anti-Trust pushes galore against the big disruptive growers.  Where is one to turn?  

Some may need to start thinking about "encore careers" and cutting expenses like Neutron Jack of old.

And do all of that while hiding from the Covid-19 Grim Reaper.  Golden years, indeed. 

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Participant ○○○

Re: Who's Buying Utilities?

Just a heads up.  I'm out of D in the low 80's.  All in all it could have been worse given the 1/3 cut in the dividend.  No idea what to do with the proceeds yet.

I'm hanging on to DUK as they haven't mentioned a need to cut.  They are scheduled to declare their dividend any day and I expect/hope they will at least maintain it, if not have a modest increase given it is the anniversary of their last increase.

Given my track record lately I will likely be smacked upside the head to the contrary, but all risk can't be eliminated and still be able to pay the bills, as .7% on the 10 year Treasury won't do it for me.

Good luck to all.

 

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Re: Who's Buying Utilities?


@Bizman wrote:

@PaulR888 wrote:

I never bought utilities.  Jeffrey Saut of Raymond James has decades of experience with utilities and doesn't like them.  Good enough for me as Jeffrey is much smarter than me.  I never bought preferreds either.  You can't dance with all the ladies.  I use REITs and BDCs


I love Jeff Saut.  While I wouldn't invest in regulated utilities in all regulatory regimes (the era of deregulation was a disaster) utilities seemed much more manageable to understand and invest in to me.  

Alas, I didn't properly account for environmentalist irrationality and the degree to which it has infected the minds of seemingly every member of the managerial, administrative, and judicial class, as well as all the brainwashed young who think we get power by praying to the Lorax or something.

BDCs are too risky for me.  Full stop. 

I dumped my REITs in early March because of the sudden stop.  2 of the four I sold have since cut their dividends about 50%, still waiting on the other 2 and for Covid to finish its world tour.

Old folks looking for returns are looking at a pretty unfavorable landscape.  Now approaches a new regime of higher taxes, regulation, and stagflation at best likely beginning next January.  Plus anti-Trust pushes galore against the big disruptive growers.  Where is one to turn?  

Some may need to start thinking about "encore careers" and cutting expenses like Neutron Jack of old.

And do all of that while hiding from the Covid-19 Grim Reaper.  Golden years, indeed. 


Hi Bizman ...   REITs have been historically a good asset class to have in one's portfolio, increasing return and Sharpe ratio while decreasing risk.  Not all REITs are alike.  There are the perceived safer plays in storage, cell towers and data centers.  

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Participant ○○○

Re: Who's Buying Utilities?

Happy news in regard to DUK via @KathieL and the dividend increase thread.

Duke Energy (NYSE:DUK) declares $0.965/share quarterly dividend, 2.1% increase from prior dividend of $0.945.

Forward yield 4.87%

Given the circumstances and the debacle with Dominion, I'd vote for Lynn Good for President!

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Explorer ○○

Re: Who's Buying Utilities?

The D situation was a good lesson in diversification.  I will hold on to it - fortunately it represents just 2%  of my portfolio and one of 4 utilities.  The drop in dividend was not welcome but in the grand scheme of things did not hurt too badly.

In the meantime thanks DUK!

Going to watch the valuations of a few others in the coming weeks/months and look to buy.

 

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Frequent Contributor

Re: Who's Buying Utilities?


@mlott1 wrote:

@rumples  Seems strange seeing someone besides me mention a Franklin fund, but I am also a holder of Franklin Utilities.  I've always liked the sector, but because of various things happening to individual utilities, I've also felt more comfortable owning a mutual fund to help spread my risk.  Franklin Utilities is a plain vanilla utility fund that does a good job investing in utility stocks and has a very good long term record.  

I think the utility sector is a good long term buy and hold.


I like that Franklin Fund too, along with Vanguard and have some in Fidelity's ETF, always up it a bit over the winter months.

I think utilities and defensive stocks will hold up best over the upcoming winter months.

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Contributor ○

Re: Who's Buying Utilities?

UTF and UTG are two closed mutual funds that are primarily utilities. They do use leverage, so there's risk. But the monthly dividend with a yield over 7% is quite attractive. 

The monthly income is great. What happens to principle can be a bit unnerving. But both have had steady dividends for years now. 

Just another option. 

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Re: Who's Buying Utilities?

@FatKat  In the past I have been sorely tempted to buy individual utility stocks, but I'm a really small investor, so I have to be extra careful about single stock risk (KO is my exception to this, and if I get burned I have no one to blame but me).  It just seemed that every time I turned around, there was a utility in trouble, and it was beyond me to figure out who was next.  So I decided that when the time came and I could start investing in utilities, it would be via a mutual fund.

I suspect that D will bounce back from its current situation, and if I held any D I would most likely just keep holding.

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Re: Who's Buying Utilities?


@chang wrote:

@Anitya wrote:

Utilities are too much work for me but enjoyed the posts.


Why work? I thought they were traditionally considered “widows’ and orphans’” stocks because they are more or less “sleep easy” to own. I suppose now all dividend payers need to be examined for sustainability, but even so, I would think utilities would be less work than momentum stocks.


Utilities are interest rate sensitive and regulated.  Seems like all the downside and limited upside.  PG&E is where I get electricity and gas to my home.   May be I am showing my lack of knowledge about utilities and yes, I do not know much more than that.  I already have specific Energy, Tech, and HC sector bets.  Do not want to make another sector bet.  If I get a break, I would love to roll the Energy bet into Tech and HC and further simplify my portfolio.

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Explorer ○○

Re: Who's Buying Utilities?

I try my best to ignore the share price and follow the yield.  Utilities have a pretty good record (except D recently!) of not cutting dividends.   What Mr. Market does to the share price is just generate buying opportunities.   Right now DUK is generating a 4.6% yield and they just raised it - a buying opportunity IMO. 

The challenge with the funds for me is that I found I could get around 1% better yield by just buying individual companies but sticking to my rule of not letting any one company get above 2% of my portfolio. 

 

 

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Re: Who's Buying Utilities?


@PaulR888 wrote:

I never bought utilities.  Jeffrey Saut of Raymond James has decades of experience with utilities and doesn't like them.  Good enough for me as Jeffrey is much smarter than me.  I never bought preferreds either.  You can't dance with all the ladies.  I use REITs and BDCs


Why doesn’t Jeffrey Saut like utilities? Because they are not growth stocks?

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Re: Who's Buying Utilities?

"Utilities are interest rate sensitive and regulated. Seems like all the downside and limited upside."

For the retired income investor, utilities offer primarily upside with little downside.

Regulated utilities that serve primarily residential consumers tend to have stable cash flows and reliable dividends with fairly consistent growth, albeit slow growth. Years ago when power generation was deregulated, utilities that were in the power generation business to whom their sales were pre-defined, took a hard shot to their revenues, as other power generators were free to underbid their formerly pre-set power rates. It tightened most utilities cash flows and made their dividends a little less secure. There was some talk, as I recall, particularly from the more progressive communities, as to why dividends were being paid at all. The logic was the rate payer was paying extra in their utility bill for a dividend paid to greedy shareholders, and if this stopped, consumer rates would go down. Fortunately, rational minds prevailed as they explained that the cost of capital must be paid, and flexible equity dividends are less costly, in the long run, than bond interest.

I'm not aware of any regulated utilities that cut their dividend during the 2008/09 recession. However, few have shown a positive dividend growth trend since them. Here is the slope of the regression line on the annual DGR of 10 of the larger regulated utilities and the dividend ETF XLU, for comparison.

utility div since 2006.jpg

Two of these have announced dividend cuts....D and CNP, with the latter announce prior to COVID-19.

FYI

BruceM

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Re: Who's Buying Utilities?


@Anitya wrote:

@chang wrote:

@Anitya wrote:

Utilities are too much work for me but enjoyed the posts.


Why work? I thought they were traditionally considered “widows’ and orphans’” stocks because they are more or less “sleep easy” to own. I suppose now all dividend payers need to be examined for sustainability, but even so, I would think utilities would be less work than momentum stocks.


Utilities are interest rate sensitive and regulated.  Seems like all the downside and limited upside.  PG&E is where I get electricity and gas to my home.   May be I am showing my lack of knowledge about utilities and yes, I do not know much more than that.  I already have specific Energy, Tech, and HC sector bets.  Do not want to make another sector bet.  If I get a break, I would love to roll the Energy bet into Tech and HC and further simplify my portfolio.


Not exactly.

Regulation of utilities To provide a steady stream of income to utilities is good for investors because it guarantees a fixed rate of return to pay the dividend since a bankrupt utility provides customers with crappy service as you Well know. State regulators will raise utility rates to prevent utility co from incurring a loss in the operation of certain power sources, e.g., nuclear power.

Rate sensitivity is not a consideration to a long term investor seeking steady above average yield when stock markets become volatile. Between January 2008 and Feb 2009 price of UTG declined 56% from 18 to 8 but still paid its 9 cent a month dividend (13.5%) because utility revenue was not affected by the financial crisis. Today UTG dividend is 18 cents a month for a 7% yield taxed at cap gains rate. 

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