Tags: Utility | Stocks | Surge

WSJ: Utility Stocks Are Poised to Surge

By    |   Tuesday, 20 Mar 2012 07:30 AM

After a hot 2011, utility stocks have sagged so far this year, but many experts say that decline makes utilities an attractive buy now.

The Standard & Poor’s 500 Utilities Sector Index has dropped 2.5 percent so far this year, while the overall S&P 500 has soared 11.7 percent.

The economy’s strength is sending investors away from defensive sectors like utilities to more cyclical sectors, such as technology.

Utilities also are suffering from a warmer than usual winter in much of the country, The Wall Street Journal reports. Household electricity usage fell 9 percent in January and February from the same period of 2011, according to the Energy Department.

In addition, natural gas prices have plunged to 10-year lows amid increased production, hurting utilities that use coal for power.

But the shift to natural gas will ultimately help utilities by cutting their costs, many experts say.
As utilities make that shift, their earnings and dividend payments will likely rise 4 to 6 percent over the next several years, Timothy Winter, a utility analyst at Gamco Investors, tells The Journal.

And many utility stocks already sport juicy yields above 3 percent.

The Motley Fool offers a list of 10 utility stocks that may be undervalued: Ameren (AEE), Calpine (CPN), Edison International (EIX), FirstEnergy (FE), Laclede Group (LG), Otter Tail (OTTR), Pinnacle West Capital (PNW), Southwest Gas (SWX), UIL Holdings (UIL), and Aqua America (WTR).

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2012-30-20
Tuesday, 20 Mar 2012 07:30 AM
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