Tags: Miller | utility | stocks | investment

Morningstar's Miller: Utility Stocks Look Good for the Long Run

By    |   Wednesday, 01 October 2014 07:32 PM

The utilities sector was the only one of the 10 Dow Jones sector indices to post a gain in Wednesday's stock market rout, and Travis Miller, director of utilities research for Morningstar, sees utility stocks as an attractive long-term investment.

"We continue to be bullish on U.S. power and natural gas prices, a boon for most diversified utilities and power producers," he writes on Morningstar.com.

Utility stocks have enjoyed/endured a "wild roller-coaster ride" over the past three years, Miller notes. "We think this offers opportunities for investors committed to holding utilities for the long run."

Utility stocks provide an attractive median dividend of 3.7 percent, compared with only 2.40 percent for 10-year Treasury notes.

Fundamentals are "generally strong" for utilities, Miller says. "Credit metrics are stronger than the past three years," he writes.

"With sustainable payout ratios, we think dividends could grow as much as 5 percent annually. . . . Those utilities with a favorable combination of constructive regulation and critical infrastructure projects should provide investors the best long-run returns."

The Street.com's Richard Suttmeier says the stock market's recent volatility makes now a good time to consider the Utilities Select Sector SPDR Fund, an exchange-traded fund.

It matches the performance of the Dow Jones Utility Average and has a dividend yield of 3.6 percent. "Because the ETF includes a basket of utility companies, it eliminates the risk of picking the wrong stock," Suttmeier writes.

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The utilities sector was the only one of the 10 Dow Jones sector indices to post a gain in Wednesday's stock market rout, and Travis Miller, director of utilities research for Morningstar, sees utility stocks as an attractive long-term investment.
Miller, utility, stocks, investment
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2014-32-01
Wednesday, 01 October 2014 07:32 PM
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