Defensive Dividend Portfolio Buy Zones, Part I: Utilities

|
 |  Includes: AEP, DUK, ED, EXC, SO
by: Parsimony Investment Research

We recently wrote a series of articles highlighting our Defensive Dividend Portfolio picks for 2012. We focused on the following low-beta, defensive sectors:

  1. Utilities
  2. Healthcare
  3. Consumer Staples
  4. MLPs
  5. Mortgages REITs

As discussed in the previous articles, The global economy will continued to be weighed down by a debt problem that took over two decades to create. The leverage that has built up in the system will not unwind for years to come and it will continue to provide significant uncertainty and market volatility.

As central banks drive down short-term rates to deal with high debt levels and low growth rates, investors have been flocking to dividend stocks in search of yield. That said, any pullback in the market should be an opportunity to add to your low-beta dividend stock positions.

This next series of articles highlights our "buy zones" for the 2012 Defensive Dividend Portfolio.

Current Buy Zones (Part 1: Utilities)

Due to the current market rally (which we believe will be short-lived), investors should consider waiting for a pullback in these stocks to enter a new position or to add to an existing position.

Most of the stocks below are currently in a positive uptrend. As such, investors should be looking for near-term areas of support as potential entry points.

Click to enlarge
American Electric Power Company (NYSE:AEP) recently broke back below its 50-day moving average ($40.06). The 200-day moving average ($37.72) and the recent December low (~$38.50) will likely provide additional support and we would be a buyer on any further dip.

Buy Zone: $38.00-$39.00

Click to enlarge

Consolidated Edison (NYSE:ED) is in a very strong uptrend, and we think that it should continue on this path for the foreseeable future. The stock has recently pulled back below the 50-day moving average ($59.33), and we would be a buyer on any further pullback.

Buy Zone: $55.00-$57.00

Click to enlarge
Duke Energy (NYSE:DUK) has been in a very strong uptrend, and we think that it should continue on this path for the foreseeable future. The stock is currently getting support at the 50-day moving average ($21.31) and we would be a buyer on any further pullback.

Buy Zone: $20.00-$20.50

Click to enlarge
Excelon Corp. (NYSE:EXC) is our "speculative" play in Utility sector. This chart certainly doesn't look as strong as the other utilities on our list. EXC is merging with Constellation later this year, and the future dividend policy of the combined company is to-be-determined. That said, the company has always paid a very stable dividend and the current yield of 5.3% is very attractive.

Buy Zone: $37.00-$38.00

Click to enlarge

Southern Company (NYSE:SO) is in a very strong uptrend, and we think that it should continue on this path for the foreseeable future. The stock is currently getting support at the 50-day moving average ($44.67) and we would be a buyer on any further pullback.

Buy Zone: $42.00-$43.00

Disclosure: I am long DUK, SO.