Roger S. Conrad

The recent spate of equity issuance is yet another sign of frothy valuations in the utility sector, but these moves set the stage for future growth. Investors should bide their time and wait for a pullback to buy our favorite utility stocks.

Utility stocks continue to trade at elevated valuations. We revisit our investment strategy for this environment.

Second-quarter earnings are in for most of the more than 200 essential-service companies in our coverage universe. You can find our analysis of these results in this month’s update to the Utility Report Card. One quarter’s results won’t make or break most companies, but this earnings season was of particular importance for two reasons. By most valuation metrics, utility stocks trade at levels not seen the early 1960s; this earnings season provided a reality check to see if the companies’ underlying fundamentals lived up to the market’s lofty expectations. Growth has also stalled out in some industries and economies this year. The past quarter’s earnings and management teams’ outlooks for the remainder of the year provide an early test of how vulnerable companies could be in a bear market or recession. The vast majority of the names that we cover continue to deliver the goods as businesses, with most meeting or exceeding their guidance. Although some companies earned higher buy targets and we feel more comfortable with some names that had landed in our doghouse, many of the stocks in our Utility Report Card trade at unsustainably high valuations. At these levels, the risk of a pullback remains elevated.

With utility stocks trading at lofty valuations in the latter stages of a bull market, investors should exercise caution.

Economies of scale and an experienced management team have enabled this master limited partnership to generate steady distribution growth despite huge swings in propane prices.

Four companies made strategic moves or posted second-quarter results that earned them an escape from the Endangered Dividends List. Within our coverage universe, three energy stocks we highlighted as being at risk of a dividend cut lived up to expectations.

With utility and telecom stocks in rally mode for much of this year, a good yield can be hard to find for income-seeking investors. We highlight three areas where investors can hunt for value.

A reinstated dividend is the first step in this company's turnaround story.

Some analysts have criticized recent acquisitions by AT&T and Verizon Communications as signs of weakness. We take a different view.

Utility stocks may be overdue for a pullback in the near term, but their future prospects remain undiminished.