Utilities Are Beating The S&P, Plus Doubling Its Yield

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Includes: AEP, D, DUK, ED, EXC, FE, SO
by: Zvi Bar
Before those pension funds, widows and orphans all became so sophisticated and started to swap debt obligations, those long-term investment groups were primarily associated with utility investments. Utilities are purveyors of necessities, and usually at a government-regulated price and restricted competition.

Due to the government-regulated pricing and distribution, utilities are considered generally reliable and predictable businesses, though issues such as the recent renewed concern over nuclear power can occur.

Nonetheless, the regulated nature of their businesses tends to make utility dividends reasonably secure, though this security means that the dividends are unlikely to grow at a rapid pace. Utilities are also generally far less volatile than the market, and the demand for utilities only increases over time as technology advances into new realms and the population continues to grow.

Below are the seven of the largest and most liquid (high volume) energy utilities within the S&P 500 that also have a yield of over 4%. I have included their current yields as well as their 2011-to-date and one-month performance rates.

1. American Electric Power Co., Inc. (NYSE:AEP)

  • Yield: 5%
  • 2011-to-date performance: 2.95%
  • One-month performance: -1.78%
    Click to enlarge
2. Consolidated Edison (NYSE:ED)
  • Yield: 4.4%
  • 2011-to-date performance: 10.07%
  • One-month performance: 1.83%
3. Dominion Resources, Inc. (NYSE:D)
  • Yield: 4.1%
  • 2011-to-date performance: 12.93%
  • One-month performance: -3.06%
4. Duke Energy Corporation (NYSE:DUK)
  • Yield: 5.5%
  • 2011-to-date performance: 3.02%
  • One-month performance: -3.16%
5. Exelon Corp. (NYSE:EXC)
  • Yield: 5%
  • 2011-to-date performance: -0.02%
  • One-month performance: -4.74%
6. FirstEnergy Corp. (NYSE:FE)
  • Yield: 5.3%
  • 2011-to-date performance: 11.69%
  • One-month performance: -6.79%
7. Southern Company (NYSE:SO)
  • Yield: 4.7%
  • 2011-to-date performance: 4.67%
  • One-month performance: -1.37%

Through the last month these energy utilities have performed far better than the broader market. The worst performing above-named utility over the last month was FirstEnergy, which is down 6.79% compared to an over 16% decline in the S&P 500. Further, Consolidated Edison is actually up almost 2% over the last month. These performance numbers do not include the dividends provided, where these utilities offer about double the yield of the S&P 500.

Moreover, six of the seven above-mentioned utilities are positive within 2011, with the seventh, Exelon, down a mere 0.02%. Additionally, three of these utilities are up over 10% within 2011. See their 2011-to-date chart, below:

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Additionally, It appears likely that several of these companies may institute dividend increases in the coming quarters. Nonetheless, this group already provides an income investor with a yield comparable or higher than a 30-year Treasury.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article should not be construed as personalized investment advice, as it does not take into account your specific situation or objectives.