The Conrad’s Utility Investor Portfolios officially launched on July 31, 2013. Since that time, the Dow Jones Utility Average is off -2.3 percent, including dividends paid.
My Aggressive Income Portfolio is up by 9.3 percent, while the Conservative Income Portfolio has returned 3.3 percent.
Will Santa Claus visit utility stock investors this year? The sector was out of the gate quickly to start the fourth quarter of 2013. But concerns about the “tapering” off of Federal Reserve bond buying quickly slowed things down.
Will the Federal Reserve really “taper” off its easy money policy? The stock market has already reacted, with dividend-paying stocks leading the selling: The Dow Jones Utility Average is now flat for the fourth quarter, after being up better than 5 percent through mid-November.
Barring a real financial earthquake, this will be the ninth year of rising interest rates since 1992.
2013 will also be the eighth of those nine that utilities and other dividend paying stocks finished in the black. The only exception was 1994, when deregulation fears upended electricity and communications.
Utilities also rose eight years when rates fell. All their biggest declines, however, were during years of falling interest rates, particularly 2008.
Utility stock prices ultimately reflect the health of underlying companies. Stocks of financially healthy companies with growing dividends always move higher. But when an economic calamity brings interest rates lower quickly, they can drop in a hurry.
Shares of transmission line operator ITC Holdings (NYSE: ITC) have dropped more than 14 percent from the all-time highs reached in early November. The immediate catalyst: A group of industrial users have demanded the Federal Energy Regulatory Commission cut its allowed returns.
Taper talk is heating up again as Federal Reserve Chairman-in-waiting Janet Yellen’s fate is debated on Capitol Hill. Rate hike speculation, however, is having much less impact on essential services stocks than it did this past spring. And one big reason is strong third quarter results.
Only three of the 28 current Conrad’s Utility Investor Portfolio recommendations have yet to report calendar third quarter earnings. That’s plenty of data to identify relevant sector trends, while we assess the health of individual companies.
The $48 billion leveraged buyout of the former TXU Corp by KKR & Co. LP (NYSE: KKR) and other private-equity outfits set record in 2007. Now, the company's impending bankruptcy underscores the risks of looking for a quick buck in the utility sector.
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
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Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.