Investing Topics: Wholesale Electricity

Capital spending plus regulatory support equals rising earnings, dividends and share prices: That’s the formula for superior total returns in utility stocks. And it’s what new Conservative Income Portfolio recommendation SCANA Corp (NYSE: SCG) is locked in to deliver at least to the end of the decade.

When AES Corp (NYSE: AES) started doing business in the 1990s, it had a simple philosophy: Scour the globe for growing electricity demand and execute projects to meet it.

Earnings season is now underway for the Conrad’s Utility Investor portfolios, with Kinder Morgan Energy Partners (NYSE: KMP) and Verizon Communications (NYSE: VZ) the first to report full numbers.

Utilities and other providers of essential services are proven survivors of even the worst market debacles. As the 2008 market crash showed, the sector takes hits with the rest of the stock market.

Thus far, my strategy has been to populate the three Conrad’s Utility Investor Portfolios as quickly as I can with high-quality fare, without paying too much.

Here’s the news from our Portfolio holdings over the past week. 

Southern Company (NYSE: SO) currently sits near a new 52-week low. The reason: A combination of investor worries about rising interest rates and concern about its substantial capital spending program.

Hydroelectric power is the world’s cleanest and cheapest source of baseload power. And with 5,900 megawatts of installed capacity and a full pipeline of new projects, Brookfield Renewable Energy Partners (TSX: BEP-U, NYSE: BEP) is the world’s premier pure play.

Discipline, consistency and hard work don’t always guarantee success. But they're the necessary foundation of every winning investment strategy.

Utility stocks might be due for a pullback, but the risks that rising interest rates pose to the sector are overblown.