Anonymous
Anonymous asked in Business & FinanceInvesting · 1 decade ago

Bad to invest in utilities?

Someone just told me that it was bad to invest in utilities because they don't "pay" well. I'm not especially intertested in dividends so excluding they "pay off" are utilities generally considered to be a reasonable investment. Btw, I'm interested in common stock if that makes any difference.

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  • Anonymous
    1 decade ago
    Favorite Answer

    Utilities are not considered growth investments as such. They are mainly bought for their relative safety and dividends. The main problem with utilities as investments is that their return on investments are set by government agencies. Hearings in rate cases can take years. And many times the agencies do not allow a reasonable roi as they are public agencies. There are different types of utilities also. What normally pops into mind when utility is mentioned is electric utility. But in addition there are gas utilities, water utilities, and telephone utilities among others. That being said at times utilites are better investments than at other times. Currently, they might be considered a better investment than many others because their beta is much lower than the run of the mill equity. DUK for instance has a beta of 0.57, a dividend of 5.0%, but a PEG of 3.0 AEP has a beta of 0.83, a dividend of 4.0%, but a PEG of 2.2. Those are two electric utilities. PNY has a beta of 0.45, a dividend of 3.8%, and a PEG of 3.3. It is a gas utility.

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  • 1 decade ago

    I'm not sure why the person told you they don't "pay" well, assuming he means dividends. Historically, they mostly pay higher dividends than most stocks.

    But they're not growth plays, so if you're looking for a screaming stock, a utility is usually not it. Of course, the key is to purchase the right utility companies at the right time.

    On the good side, they are a fairly recession-resistant stock.

    Look, for example, at Progress Energy (PGN): They've got a current yield of 5.8%, and they do most of their business by providing electricity to North Carolina, South Carolina, and west central Florida. Nobody is going to stop using electricity, so it's a fairly stable market for it to be in. It is growing slowly but surely. Is that a sexy stock? No. Is it a dependable stock. Likely. But if you just want dependable income, maybe corporate bonds are better.

    So no, it isn't bad to invest in utilities. It is just a matter of what you want.

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  • felico
    Lv 4
    3 years ago

    specific. Sorry even yet it would. To get a return that nets you an earnings bigger then you definately pay on the own loan might require significant possibility and in spite of if it paid off interior the long-term you will possibly have classes of months in all probability whilst your investment grow to be worth under the own loan and all of the sleepless nights that could desire to consequence. The temptation then may well be to sell at a loss and you would be greater desirable in the back of than you experience top now. ultimately, maximum loans require a return of critical besides as activity throughout the term of the own loan, the place might that money come from? maximum extreme yielding investments are actually not that liquid to permit you to withdraw small sums each and each month so your cashflow (the quantity of money which you may desire to pay each and each month) might particularly worsen as a consequence. super attempt however, shop questioning and being imaginitive. precise tip, hit upon a choose that many human beings have and are available up with the thank you to remedy it. interior the intervening time turn to a debt counsellor, thankfully for you you're actually not the 1st to be in this place.

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  • 1 decade ago

    First, what are you calling a utility? Only US gas and electric companies? Worldwide? Gas producers? Sasol in South Africa, is a very interesting company. They produce synthetic petrolium from coal, and they produce electricity. South Africa is short of energy, so they should do well. Chesepeake Energy produces natural gas in the US, they are drilling alot of wells, have been a hot stock and will continue to be a hot stock.

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  • 4 years ago

    depends what kind of utilities you're talking about - general electricity or gas - probably not with the volatile markets - however, in the UK, companies such as utilitywise - they're a safe bet - they work with the utilities companies to help businesses save money, they're sustainable and aim to help the UK and businesses achieve targets in reducing carbon emissions - more information on their investors site - https://www.utilitywise.com/investor-relations/

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  • dk
    Lv 6
    1 decade ago

    natural gas is the future!

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