Safe Havens
Utilities traditionally have been safe havens for investors. They pay steady dividends and their product is always in demand. Now, though, utilities have become one of the priciest sectors, outpacing seven of the 10 sectors in the S&P 500 over the past five years.
In 2007 so far, the S&P Utility Index is up 12%, vs. 7% for the broad index, and dividends are at a historic low rate of 3%. Deregulation and low bond yields account for the increased interest in utilities over the past five years.
At current price levels, the stocks of regulated utilities might be the most vulnerable because regulators can cap their profitability.
Although this might not be a good time to start with utility stocks, if you are currently dollar-cost-averaging into utilities, then it makes sense to keep up regular contributions because supply-demand imbalances make utilities appealing long-term holdings.
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In 2007 so far, the S&P Utility Index is up 12%, vs. 7% for the broad index, and dividends are at a historic low rate of 3%. Deregulation and low bond yields account for the increased interest in utilities over the past five years.
At current price levels, the stocks of regulated utilities might be the most vulnerable because regulators can cap their profitability.
Although this might not be a good time to start with utility stocks, if you are currently dollar-cost-averaging into utilities, then it makes sense to keep up regular contributions because supply-demand imbalances make utilities appealing long-term holdings.
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posted by Bob Moser at
7:54 PM
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