Roger S. Conrad

The recent rally in utility stocks has pushed valuations to elevated levels and lowered dividend yields. We explain our strategy for navigating this environment.

First-quarter earnings season has included a raft of weak results and guidance reductions from the more than 200 essential-service companies in our Utility Report Card.  

This master limited partnership follows a simple business plan that continues to drive cash flow and distribution growth.

The yieldco universe is loaded with dogs, but one company could be your portfolio's best friend.

Consolidated Edison's recently announced joint venture with Crestwood Equity Partners LP is the latest example of a utility leveraging its position as a demand-side customer and its low cost of capital to pursue ambitions in the midstream segment. Expect this trend to gain momentum in coming quarters.

Exelon Corp finally closed its acquisition of Pepco Holdings. Could another deal be in the utility's future?

Morningstar (NSDQ: MORN) recently reported that 247 mutual funds suffered outflows of at least 10 percent over the past year, with 18 losing more than 40 percent of their assets under management. Redemptions on this scale usually occur toward the end of a bear market, when many investors throw in the towel. This hemorrhaging stems from the growing belief that passive investment strategies involving exchange-traded funds (ETF) will outperform an active management over the long haul. Lower fees also help to bolster overall returns. Of course, ETFs and other products that offer one-stop exposure to a particular sector or theme often weight their positions by market capitalization. Utilities Select Sector SPDR (NYSE: XLU), for example, rebalances its holdings quarterly and exhibits a bias toward stocks that have already run up. At last check, NextEra Energy (NYSE: NEE), which trades at a record 21 times trailing earnings, accounted for 9 percent of the ETF’s portfolio. And the instant diversification offered by ETFs mean that you’ll always own the good, the bad and the ugly, which dilutes the best performers’ contribution. But discriminating investors can take advantage of the rise of ETFs.  

The hubbub surrounding the unveiling of Tesla Motors’ Model S has resulted in a bumper crop of articles about the ascendancy of electric vehicles and reduced demand for fossil fuels. These headlines attract eyeballs, but they don’t necessarily shed light on the best opportunities for investors who want to profit from the long-run success of electric vehicles.

With utility stocks trading at frothy valuations, investors should consider taking some profits off the table in their big winners and exiting any higher-risk names to raise dry powder for future buying opportunities.

A transformative acquisition lands this former Aggressive Income Portfolio holding in the Conservative Income Portfolio.