Anyone Invested In Utilities?

OneEyedDiva

SF VIP
Location
New Jersey
I've had a utility fund for decades even though it's performance may not be as spectacular as other investments. I just invested in another one. I've read articles that tout utilities funds as good choices for bear (down) markets as they are considered "defensive investments". I've experienced the cushioning of the economic blow through bear markets. The advantages of ownership: Performance not necessarily correlated to market conditions, no matter what the economic environment is...people will need to use utilities. They pay usually healthy dividends and capital gains. Disadvantages: Rises in interest rates have negative impacts on these funds and according to the article below "Utility funds also face difficulty at times in passing along changes in energy prices efficiently to consumers and investors due to price regulations". I was wondering if anyone here has utility mutual funds or ETFs in his/her portfolio.
https://www.investopedia.com/articles/mutualfund/08/utility-funds.asp
 

As customers (in the 1990's), in Nevada, we were able to purchase stocks directly from both the natural gas and electric company. Minimum purchase was $25 and with three school-age sons, I could actually afford that, most months! When we moved back east the electric company required that we sell the stock but we retained the natural gas. I tried to make regular purchases and it has grown. They used to post dividends every month but went public, some years ago and now only post dividends every quarter. It is still growing and I anticipate gifting some to our, now grown, sons to help with their portfolios. It isn't enough to live off the dividends (wish it was) but makes a great emergency fund, in case we need it!
 

i don't buy sector funds ... those are funds that in a particular area only .... to much risk if it is a poor time for that area
And that is the reason I have a diversified portfolio MJ. The utility funds make up only a portion. But thanks for answering because I was curious to know your thoughts about it.
 
Our portfolios are diversified for obvious reasons but our first venture into investing was in utilities. Our logic pretty much the same, manufacturing & the general population need electricity. Over 30 years of investing built a decent amount of shares. To the point after those 30 years of sending in money to purchase shares we decided that sending in money to buy more shares was no longer necessary. With regular buying & dividend reinvesting we exceeded and continue to exceed what we targeted as a goal.

Zero doubt that there will be rise and fall the key is starting early with a long term goal. During those 30 years stock splits of two for one took place, that feature helped our long term goal.
 
My opinion only, I believe that investors who buy into utilities usually do so for two reasons. 1. Growth and 2. Income. Investors in utilities wait for their companies to expand and grow, thus why I say growth. Many electric companies have merged with other gas and electric companies to be one huge players in the utility market. The Income part comes from their dividends.

Some years ago, I invested in BG&E (Baltimore Gas & Electric), which merged with Exelon. Back in the day, about the late 80’s, I bought a few hundred shares of BG&E for $8.00. When they started talking to Exelon, the stock went up. After the merger, it rose again and as Exelon grew, so did the value of my shares. (I think we received 1 share of Exelon for every 3 or 4 shares of BG&E.) Anyway, we sold a few years after the merger and made a nice return, even after paying the capital gains.

I also received X number of shares of Bell Telephone from my Uncle’s estate back in the early 60’s while I was still in high school. This uncle was one of my dad’s brothers who never married, so he divided his estate among his nieces and nephews. I know, nice man. Yes, he was a very nice person who treated everyone with respect and dignity. (He died young due to a devastating illness.) Continuing on, I think it was either the late 70’s or early 80’s that Bell was forced to breakup and the shareholders had to decide if they wanted to either exchange their shares for one of the other Bell’s companies, or cash in. I knew absolutely nothing about stocks or the market, so I let my dad handle it. Instead of cashing in the Bell stock, he exchanged my shares for Pac Bell, which then became AT&T. It floundered for awhile, but recovered and I had a nice return. Well, seeing how the stock never cost me anything, how could I not?

So, yes, I have dipped into utilities, but like I wrote earlier, they are mainly for growth and the income part comes from their normally good dividends, which is why many seniors invest in them. They use the dividends to either purchase more of that same stock, or take the cash to help them through retirement.

Right now, I like First Energy (FE). There’s probably better, but FE has been very consistent and also growing.
 
My opinion only, I believe that investors who buy into utilities usually do so for two reasons. 1. Growth and 2. Income. Investors in utilities wait for their companies to expand and grow, thus why I say growth. Many electric companies have merged with other gas and electric companies to be one huge players in the utility market. The Income part comes from their dividends.

Some years ago, I invested in BG&E (Baltimore Gas & Electric), which merged with Exelon. Back in the day, about the late 80’s, I bought a few hundred shares of BG&E for $8.00. When they started talking to Exelon, the stock went up. After the merger, it rose again and as Exelon grew, so did the value of my shares. (I think we received 1 share of Exelon for every 3 or 4 shares of BG&E.) Anyway, we sold a few years after the merger and made a nice return, even after paying the capital gains.

I also received X number of shares of Bell Telephone from my Uncle’s estate back in the early 60’s while I was still in high school. This uncle was one of my dad’s brothers who never married, so he divided his estate among his nieces and nephews. I know, nice man. Yes, he was a very nice person who treated everyone with respect and dignity. (He died young due to a devastating illness.) Continuing on, I think it was either the late 70’s or early 80’s that Bell was forced to breakup and the shareholders had to decide if they wanted to either exchange their shares for one of the other Bell’s companies, or cash in. I knew absolutely nothing about stocks or the market, so I let my dad handle it. Instead of cashing in the Bell stock, he exchanged my shares for Pac Bell, which then became AT&T. It floundered for awhile, but recovered and I had a nice return. Well, seeing how the stock never cost me anything, how could I not?

So, yes, I have dipped into utilities, but like I wrote earlier, they are mainly for growth and the income part comes from their normally good dividends, which is why many seniors invest in them. They use the dividends to either purchase more of that same stock, or take the cash to help them through retirement.

Right now, I like First Energy (FE). There’s probably better, but FE has been very consistent and also growing.
Nice 911 ! I rarely take the dividends and healthy capital gains distributions from my utilities fund(s), prefer to keep reinvesting them so my shares have grown quite a bit over the years as well. I had the presence of mind to put the funds into a Roth so all those gains are tax free. :)
 
Our portfolios are diversified for obvious reasons but our first venture into investing was in utilities. Our logic pretty much the same, manufacturing & the general population need electricity. Over 30 years of investing built a decent amount of shares. To the point after those 30 years of sending in money to purchase shares we decided that sending in money to buy more shares was no longer necessary. With regular buying & dividend reinvesting we exceeded and continue to exceed what we targeted as a goal.

Zero doubt that there will be rise and fall the key is starting early with a long term goal. During those 30 years stock splits of two for one took place, that feature helped our long term goal.
Congratulations on exceeding your investment goals Knight! I love hearing stories like yours. The utility fund was one of my first investments too. In fact, I got "bored" with the target fund I originally invested in with that particular brokerage and switched to it's utilities fund. I've never regretted it. While I don't use "new money" to buy shares (couldn't anyway because it's in a Roth and I have been retired for 21 years), I have chosen to reinvest most of the income.
 
meh---- in the end it is all about total return . a utility like PPL when all was said and done , dividends , reinvestment and all has seen not even a 3% average return over the last 5 years . on the other hand a simple s&p index has returned 10% ... other utilities lagged as well , verizon 7% , at&t 5% ....

in the end you can get better returns , far more diversification and LESS volatility in just a broad based index . the old myth about utilities being less volatile has not been true for many years ... they tend to have huge swings like any other stock does . ..
 
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To each their own mathjak107. A lot of people read posts about investing to gain an understanding about what works for others. We are not concerned with where PPL is now since we have exceeded our goal & that is intended to be part of inheritance for our kids. And yes ups & downs can hurt if depending on that as an income or revenue source to live on was the goal.

Selling a 5 bedroom home on 8 acres of land that was mortgage free during the height of a sellers market with no tax on the capital gains because of the rule at age 55 wasn't part of our original plan but worked for us. During the 1980's investing all but $25.00 of my wife's pay in Kraft stock building 1600 shares was a short of the goal of 2000 shares. But the that stock split 2 for 1. Kraft went thru a restructuring, we could have sold at a premium but didn't. Then a tobacco company bought Kraft offered to buy at a premium didn't sell. Not greedy just felt that as a company Kraft was a winner & 3200 plus shares was good to have. Not long after acquiring Kraft the stock split 2 for 1 making the share accumulation 6400 plus. & yes we knew the split meant the same as before the share price dropped. About two years later the stock went as best as I can remember to around $187.00 a share then split again 4 for 1. We sold, paid the capital gains tax, paid the small remaining mortgage & invested the rest in what we thought was good for us.

Our plan was for me to retire at 55 but with the good fortune we had in investing and being offered a great retirement package to leave at age 54. Retiring to enjoy life is what we are doing. I think it's understandable that having direct deposit money from 2 pensions, 2 Social Sec. 2 each having MRD traditional IRA & self directed IRA. At 78 being concerned with what percent PPL has performed at just isn't part of our life. We live well enjoying our last years together.
 
the ppl comment was not directed to you .. it is just a general comment ... sector investing can be risky and especially volatile if individual stocks ... most would be far better served buying the s&p 500 and stay away from individual stocks and specific sectors.

there is nothing magical about dividends ..you need the same exact increase in appreciation to see the dividend as a return ... it is not free money sprinkled by fairy's on unicorns ... there is an equal reduction in your investment value that most people have no idea happens . it is NOT like interest which is on top of what you have ... these payouts are offset by an equal decrease in what you have .

they are nooooo different then when a fund pays out ..appreciation or a drop does it's thing , the fund pays out and the next day if you reinvested your value invested is identical to what you had before the payout ... it just is arraigned differently like a stock split would be .
 
meh---- in the end it is all about total return . a utility like PPL when all was said and done , dividends , reinvestment and all has seen not even a 3% average return over the last 5 years . on the other hand a simple s&p index has returned 10% ... other utilities lagged as well , verizon 7% , at&t 5% ....

in the end you can get better returns , far more diversification and LESS volatility in just a broad based index . the old myth about utilities being less volatile has not been true for many years ... they tend to have huge swings like any other stock does . ..
One of my utility funds has a YTD return 19%, the other 12%. Their 5 year average annual returns are 17.5% and 17.9%. And during the last "crash" when stocks plummeted over 600 points (forgot the exact number), while other investments lost between 50 cents and a dollar per share, the utilities only lost pennies per share. I believe one was 3 cents and the other 5 cents.
 
One of my utility funds has a YTD return 19%, the other 12%. Their 5 year average annual returns are 17.5% and 17.9%. And during the last "crash" when stocks plummeted over 600 points (forgot the exact number), while other investments lost between 50 cents and a dollar per share, the utilities only lost pennies per share. I believe one was 3 cents and the other 5 cents.
the same can be true of all stocks ... the returns depend on what you own ....

what utility funds are you referring to , i want to look it up ?
 
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To each their own mathjak107. A lot of people read posts about investing to gain an understanding about what works for others. We are not concerned with where PPL is now since we have exceeded our goal & that is intended to be part of inheritance for our kids. And yes ups & downs can hurt if depending on that as an income or revenue source to live on was the goal.

Selling a 5 bedroom home on 8 acres of land that was mortgage free during the height of a sellers market with no tax on the capital gains because of the rule at age 55 wasn't part of our original plan but worked for us. During the 1980's investing all but $25.00 of my wife's pay in Kraft stock building 1600 shares was a short of the goal of 2000 shares. But the that stock split 2 for 1. Kraft went thru a restructuring, we could have sold at a premium but didn't. Then a tobacco company bought Kraft offered to buy at a premium didn't sell. Not greedy just felt that as a company Kraft was a winner & 3200 plus shares was good to have. Not long after acquiring Kraft the stock split 2 for 1 making the share accumulation 6400 plus. & yes we knew the split meant the same as before the share price dropped. About two years later the stock went as best as I can remember to around $187.00 a share then split again 4 for 1. We sold, paid the capital gains tax, paid the small remaining mortgage & invested the rest in what we thought was good for us.

Our plan was for me to retire at 55 but with the good fortune we had in investing and being offered a great retirement package to leave at age 54. Retiring to enjoy life is what we are doing. I think it's understandable that having direct deposit money from 2 pensions, 2 Social Sec. 2 each having MRD traditional IRA & self directed IRA. At 78 being concerned with what percent PPL has performed at just isn't part of our life. We live well enjoying our last years together.
Knight...just think some people enjoy managing their portfolios as an "interest" in retirement. My husband plays tournament poker and some of the big winners...millions and up, have quit playing poker and started "doing stocks", as one said its "way simpler and way way easier". Lets face it, several days of big money table play poker is very hard work.
 
buying equity funds is very different than poker . poker has a loser for every winner .. equities does not .. i can buy something and sell it at a gain , they can buy it from me an sell it a gain , so on and so on ..that is very different from gambling .
 
buying equity funds is very different than poker . poker has a loser for every winner .. equities does not .. i can buy something and sell it at a gain , they can buy it from me an sell it a gain , so on and so on ..that is very different from gambling .
You missed my point...its all about "interests". If you don't like or care for poker you wouldn't have done it in the first place, now would you? If you liked poker and have have made a ton of money and worked hard at it, you may want to find something else you like...in this case, something that's easier on body...lol. Its all about "interests".
 
the same can be true of all stocks ... the returns depend on what you own ....

what utility funds are you referring to , i want to look it up ?
Exactly...it depends on what you own. Ya know...as much good things as I've read about index funds, I've never invested in one. No particular reason either.
 
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the ppl comment was not directed to you .. it is just a general comment ... sector investing can be risky and especially volatile if individual stocks ... most would be far better served buying the s&p 500 and stay away from individual stocks and specific sectors.

there is nothing magical about dividends ..you need the same exact increase in appreciation to see the dividend as a return ... it is not free money sprinkled by fairy's on unicorns ... there is an equal reduction in your investment value that most people have no idea happens . it is NOT like interest which is on top of what you have ... these payouts are offset by an equal decrease in what you have .

they are nooooo different then when a fund pays out ..appreciation or a drop does it's thing , the fund pays out and the next day if you reinvested your value invested is identical to what you had before the payout ... it just is arraigned differently like a stock split would be .
It would be hard for anyone who is paying attention not to notice that after their dividend distribution, Fund X dropped 35 cents (the exact or almost exact amount of the distribution). But as I've said before, the 35 cent drop IS NOT PERMANENT. The share price rebounds, sometimes within days and usually goes on to go much higher so that the original shares and ones bought from reinvestment of dividends increase in value. Of course, I realize not everyone is reinvesting their shares and perhaps that's the scenario you're referring to.
 
It would be hard for anyone who is paying attention not to notice that after their dividend distribution, Fund X dropped 35 cents (the exact or almost exact amount of the distribution). But as I've said before, the 35 cent drop IS NOT PERMANENT. The share price rebounds, sometimes within days and usually goes on to go much higher so that the original shares and ones bought from reinvestment of dividends increase in value. Of course, I realize not everyone is reinvesting their shares and perhaps that's the scenario you're referring to.

irrelevant how many shares you have . it is like stock split each time ..just do the math to see how the price set back and increase in shares equal the dollars you had prior which markets compound ...it is only about the appreciation on the dollars invested not how those dollars are configured ..it can be one share at the price that equals the dollars invested .....compounding is always on dollars not how many shares those dollars are made up by .

reinvesting merely switches the existing value around so it is configured differently but adds no more new dollars . in fact it does the opposite if you do not reinvest and leaves you with less dollars starting out being acted on .

if you have 1000 shares of a 100 dollar stock, that is 100k invested

.if it falls 10% over the quarter to 90k and pays a 10% dividend you will have 81k left invested after the mandatory roll back and 9k in pocket so you have 1000 shares at 81 a share left for markets to act upon . if you reinvest the 9k back in back in at this reduced price of 81 dollars you will have 1111 shares at 81 a share .

the opposite happens if markets compound it up but the dollars stay the same.

it is no different than a fund distribution ...you go to sleep and wake with more shares at a lower price ..the same dollars you had before are compounded on . number of shares changing is irrelevant when you reinvest ...

people have a hard time understanding the fact that they have exactly the same dollars working for them both before the stock goes ex div and after the stock adjusts and they reinvest .

the gain you get is from appreciation , so after the stock appreciates they hand you back a piece and subtract the dollars off your balance ..if you reinvest they put those dollars back in but at an adjusted share price worth less with more shares to offset it but same dollars being compounded as you had
 
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the same can be true of all stocks ... the returns depend on what you own ....

what utility funds are you referring to , i want to look it up ?
I've seen different return rates from different sources. This is one of the utility funds I own as reported by Morningstar's Instant X-Ray. Slightly different numbers than Schwab's "Report Card". Dates used to compile reports are a factor I'm sure.
https://www.morningstar.com/funds/xnas/pruax/quote
 
Dividends also represent an opportunity to reallocate capital in a way that company management cannot. If dividends are received in an portfolio with funds with low-ish correlations (e.g., stocks/bonds, US/international, growth/value, large cap/small cap) then dividends offer an opportunity to buy low with dividend cash flow. It can work especially well in a tax deferred account like an IRA or 401(k).

I don’t have utilities, but I bought a healthy dose of REITs for somewhat similar reasons during the middle of last year - primarily for their low correlations to my other asset classes and the dividend cash flow.

There’s also a psychological benefit to receiving cash without selling down equity principal, which is an underappreciated aspect of behavioral finance.
 
Dividends also represent an opportunity to reallocate capital in a way that company management cannot. If dividends are received in an portfolio with funds with low-ish correlations (e.g., stocks/bonds, US/international, growth/value, large cap/small cap) then dividends offer an opportunity to buy low with dividend cash flow. It can work especially well in a tax deferred account like an IRA or 401(k).

I don’t have utilities, but I bought a healthy dose of REITs for somewhat similar reasons during the middle of last year - primarily for their low correlations to my other asset classes and the dividend cash flow.

There’s also a psychological benefit to receiving cash without selling down equity principal, which is an underappreciated aspect of behavioral finance.

dividends do not accomplish anything that can't be accomplished by selling equal dollars from a portfolio . as long as total return is the same or greater they will have identical balances and last just as long .

as far as management not squandering money ? think again ... there is no evidence they spend and waste any less .

case in point .

AT&T paid $100 billion to enter the cable business

AT&T thought it would be a good idea to diversify by paying $100 billion to take on cable company TCI. It was wrong! AT&T broke itself up a few years later and sold off the cable assets.

AT&T tried to elbow its way into the personal computer business with a hostile $7 billion takeover of NCR. It didn't work, and AT&T later spun the company back out at a $4 billion valuation.

Microsoft paid an estimated $500 million for mobile phone company Danger. It was supposed to be working on new phones for Microsoft, but most of the key employees left the company. The end result of the acquisition was the Kin, a social smartphone from Microsoft that totally bombed.

Cisco probably bought Pure Digital, the company that makes the Flip, right at the peak of its value in 2009. Since then high definition video cameras have been built into just about every smartphone making the Flip pretty much worthless in the long run. Which is probably why Cisco killed the $590 million acquisition earlier this year.

After Google bought DoubleClick, Microsoft tried to keep up by buying ad company aQuantive for $6 billion. The acquisition never really worked out. The aQuantive executives left two years after the deal closed and the technology was discarded.
..
AOL-Time Warner is obviously the worst

i can go on and on
 
Dividends were once a company’s way of saying look at me .. I am doing so well I have money I don’t even need .it was a sign of health and investors liked that .

But of course we found that was not really true ..boards voted to pay dividends right up in to the financial graveyard as they went bankrupt....

Dividends have a whole lot of myth and mis information believed by the uninformed , but if they simply did the math all they are is a return of a piece of the share price so you have less dollars invested .

If you reinvest you merely end up back to where you were in total dollars invested before the stock traded ex div ...there is nothing magical going on or free money ....otherwise we would all buy the day before it went ex div and sell after ..so obviously that accomplishes nothing ....there is not even a benefit to reinvesting when markets fall ...the math stays the same because to make a difference you need to add more dollars then you had
 
I think you are making part of my point. I would rather reallocate excess cash than giving management the opportunity to do so. Management is notoriously bad an reinvesting their own cash (there are always exceptions). There’s no downside to dividends in a tax deferred account.

And selling equities is easy to do in a bull market with healthy gains, not sure it will be as easy in a deep bear market - and if management does not feel comfortable making distributions because they need the cash, then they’ll keep it - otherwise I’ll take that cash dividend and buy whatever is cheapest within my portfolio (i.e., rebalance).
 


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