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Renewable-Focused Utilities: Joining Energy’s March Higher

By Roger S. Conrad on May. 9, 2024
There are no energy stocks in the S&P 500’s top 10. The biggest utility, NextEra Energy (NYSE: NEE), is only #56. And even all utilities and oil and gas stocks together are just 6 percent of the stock market’s premier blue chip index. That’s historic underweighting. But since oil prices bottomed in spring 2020, the S&P Energy Index has beaten the technology-stock laden S&P 500 by nearly 160 percentage points.

Between AI and M&A Utilities will Get Their Due

By Roger S. Conrad on Apr. 3, 2024
The Dow Jones Utility Average closed out Q1 barely in the black and lagging the S&P 500 by about 9.3 percentage points. The average total return for CUI portfolio stocks was a bit better at 5.8 percent. But the bottom line is this is still a stock market chasing momentum and growth stories, rather than value and dividends. The essential services stocks that have shone the most so far in 2024 have been tightly connected to popular investment themes like nuclear power, such as our top performer Vistra Energy (NYSE: VST), or else beneficiaries of M&A. MDU Resources’ (NYSE: MDU) pending spinoff of Everus Construction Group in late 2024, for example, is exciting investors as much as last year’s of materials company Knife River (NYSE: KNF) did not—mainly because KNF has roughly doubled in value since.

Eye on the Bottom Line: Our Companies Have Never Been Stronger

By Roger S. Conrad on Mar. 11, 2024

So far in 2024, the Dow Jones Utility Average lags the S&P 500 by nearly 10 percentage points. But over the past month, buying interest has picked up for at least a handful of CUI portfolio companies. Leading the way are nuclear powered Constellation Energy (NYSE: CEG) and Vistra Energy (NYSE: VST), with year-to-date gains of 46 and 57 percent respectively. But even underperforming Avangrid Inc (NYSE: AGR) now has a double-digit 2024 return, as parent Iberdrola SA (Spain: IBE, OTC: IBDRY) has made a non-binding all-cash takeover offer that’s likely to go higher. I continue to believe utilities as a sector won’t really capture upside momentum until there’s a genuine Federal Reserve pivot to lower interest rates. And with the central bank reactive as ever to the latest data point, investors have no choice but to be patient.

Utility Business is Booming, Stocks Will Take Longer

By Roger S. Conrad on Feb. 12, 2024

About a quarter of the 172 Utility Report Card members have reported calendar Q4 results and updated guidance. The top takeaway: There’s still absolutely no sign of the utility earnings Armageddon that’s now reflected in sector stocks’ bear market-like prices.

One reason for utility business strength is simply rising demand. Rapid adoption of artificial intelligence has massively and relatively suddenly begun ramping up electricity usage at data centers. And as my feature article highlights, utilities are increasing investment plans in response, which are the primary drivers of their long-term growth.

Falling Borrowing Costs = Rising Stock Prices

By Roger S. Conrad on Jan. 11, 2024

The Dow Jones Utility Average finished 2023 with a -5.2 percent loss including dividends. That’s the worst performance for utilities since 2008.

It’s a far cry from that year’s -27.8 percent pummeling. But the DJUA’s 31.3 percentage point underperformance of the S&P 500 is actually worse than 1999—when a similar combination of rising interest rates and soaring technology stocks soured many investors on dividends.

So in 2024, utility stocks have outperformed, as they have since early October. One big reason to expect more gains: A massive decline in companies’ borrowing costs that’s occurred well in advance of any Federal Reserve easing.

Utilities Re-Rating in Progress

By Roger S. Conrad on Dec. 11, 2023

There’s just three weeks left until New Year’s Eve. And the Dow Jones Utility Average is still down –6.2 percent in 2023. That leaves the sector on track for its worst performance since 2008, barring a powerful end-year rally,—though that year’s -27.8 percent demolishing is in a whole different league.

Since early October, however, the DJUA is up 11.5 percent, topping even the robust returns from the S&P 500 and the big technology stock Nasdaq 100. And the biggest winners the past two months have been the stocks that were beaten up the most through September, for example AES Corp (NYSE: AES) with an 60 percent-plus return.

My view: We’re in the early stages of a utility sector re-rating and stock price recovery.

Utilities and the Earnings Collapse That Never Happened

By Roger S. Conrad on Nov. 13, 2023

Will higher for longer interest rates derail utilities’ inflation-beating dividend growth? The Dow Jones Utility Average’s total return is 27 percentage points behind the S&P 500’s so far in 2023, a wider gap than in 1999. So obviously, the Wall Street consensus has been yes. Reality says different. In fact, no fewer than 48 of the 172 companies in my Utility Report Card coverage universe raised their 2023 guidance after releasing Q3 results. A third that many reduced guidance, but none cited higher interest rates as a primary reason.

Evergy Inc (NYSE: EVRG) cut the mid-point of its annual target growth range from 7 to 5 percent. But every other company in the coverage universe affirmed previous projections. Several announced meaningful capital spending increases.

Utilities and Dividend Stocks: After the Crash

By Roger S. Conrad on Oct. 9, 2023

Focus on quality. Invest incrementally, and keep a generous pile of cash to scoop up bargains when prices become too low to resist. That’s been our basic strategy in 2023, in anticipation of worse to come for the economy and markets. And tough times are exactly what we’ve seen over the past month. Since September 15, the Dow Jones Utility Average has lost more than -10 percent, taking its year to date loss to -14.6 percent including dividends.

As always happens in major downturns, some of the biggest losses are in places where we least expected them. A good example is NextEra Energy (NYSE: NEE). America’s leading producer of solar, wind and energy storage reduced dividend growth guidance at its affiliate NextEra Energy Partners (NYSE: NEP). And the result was several days of the worst selling for utilities since March 2020.

Investing Like It’s 1999

By Roger S. Conrad on Sep. 11, 2023

With money market funds and CDs paying 5 percent plus, many investors are asking how dividend stocks can compete on yield.

The far more relevant question: How they stack up on total return, over a meaningful period of time. And on this score, cash alternatives don’t come close to matching up.

Not since 1999 have essential services sectors lagged market averages by this great a margin. Year to date, the Dow Jones Utility Average has dropped by nearly -10 percent. The S&P 500, in contrast, is ahead by 16 percent. And despite losing some momentum recently, the Nasdaq 100 is up better than 40 percent.

Utility Earnings and Stock Prices: Behind the Divergence

By Roger S. Conrad on Aug. 7, 2023

The Dow Jones Utility Average is now underwater by nearly -7 percent including dividends so far in 2023. That’s more than 25 percentage points behind the S&P 500, which continues to be pushed higher by momentum-fueled big technology stocks.

In contrast, twice as many companies in my coverage universe (18) have so far raised their 2023 guidance following Q2 earnings as reduced it. And none have cut the longer-term growth guidance that will ultimately drive their share prices higher.



Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. Roger b