Investing Topics: Electric Utilities

Buying stocks of strong companies at the lowest possible prices: That’s been my primary strategy thus far for the Conrad’s Utility Investor Portfolios.

This month, I’m adding two stocks to the Conservative Holdings.

With large financial institutions and exchange-traded funds (ETFs) dominating daily trading, markets are as volatile as ever.

Fortunately, the key to success in utilities and essential services is the same as it’s been for more than a century: Spotting where investment will earn a fair return, and following the money to a rising stream of dividends.

As goes January, so goes the year. That old Wall Street adage doesn’t bode well for most of the stock market.

Last November, I advised income investors to favor AT&T (NYSE: T) a traditional dividend paying stock, over shares of its iPhone partner Apple Inc (NSDQ: AAPL).

Fourth quarter and full-year earnings normally dominate the news this time of year. And rightly so: They’re what ultimately shape shareholder returns.

This week, FirstEnergy Corp (NYSE: FE) announced the first electric utility dividend cut for 2014. Fortunately, it’s likely to be the last as well.

Count me a “distech” skeptic. So-called disruptive technologies never fail to grab headlines. Those who bet on them, however, usually wind up with empty wallets.

Nothing destroys shareholder value like a dividend cut. Investors should steer clear of these names.

Seek stocks of healthy and growing companies whose prospects exceed investor expectations. Then build a diversified and balanced mix you can hold long-term, to enjoy the rising cash flow and share price appreciation that growing dividends provide over time.

The Dow Jones Utility Average has lost ground in 17 of the 30 Januarys since 1984. Happily, only 5 of those declines led to a losing year. And in 13 winning Januarys, the average total return was 24.8 percent—the only losing year 1987.