Anyone Invested In Utilities?

Liberty said:
math...why haven't you been investing in them, just curious. What do you use in place of that type of stock genre , if anything?
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i see no reason to ... my diversified equity funds have better returns , and less risk since they are far more diversified . betting on a sector is a much higher risk game then just the volatility of a diversified etf , fund or index ...
people don't realize how risky betting on the whims of a sector can be. a balanced fund has the same beta ( volatility) as many utilities , less risk overall and better long term returns.

the bulk of most sector funds is electric power ... the advent of larger more efficient battery packs and solar panels have been seeing more and more large users go in to generating their own power ... vegas utilities have been getting killed as more and more large users are divorcing themselves from utilities. this is a trend that will continue
 
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mathjak107 said:
i see no reason to ... my diversified equity funds have better returns , and less risk since they are far more diversified . betting on a sector is a much higher risk game then just the volatility of a diversified etf , fund or index ...
people don't realize how risky betting on the whims of a sector can be. a balanced fund has the same beta ( volatility) as many utilities , less risk overall and better long term returns.

the bulk of most sector funds is electric power ... the advent of larger more efficient battery packs and solar panels have been seeing more and more large users go in to generating their own power ... vegas utilities have been getting killed as more and more large users are divorcing themselves from utilities. this is a trend that will continue
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What you are saying then, is that you always make good money, each and every year?
 

Liberty said:
What you are saying then, is that you always make good money, each and every year?
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no , markets are never consistent year to year in returns , not even utilities .. they are stocks , they are long term investments and generate good returns usually over longer periods of time . even vanguards utility index lost money at times , as well as returns vary . last year it made 4% .... it lost money in 2015 , this year it is up 27%. so there is no such thing as making good money every year. what you want is an acceptable long term average return with an appropriate risk ... buying individual stocks , utilities or not , take on a whole other layer of risk that diversified funds do not have ....namely individual company risk plus market risk as well as utilities have a high amount of interest rate risk too . rising rates are the kryptonite to them since they run on so much borrowed money
 
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mathjak107 said:
no , markets are never consistent year to year in returns , not even utilities .. they are stocks , they are long term investments and generate good returns usually over longer periods of time . even vanguards utility index lost money at times , as well as returns vary . last year it made 4% .... it lost money in 2015 , this year it is up 27%. so there is no such thing as making good money every year. what you want is an acceptable long term average return with an appropriate risk ... buying individual stocks , utilities or not , take on a whole other layer of risk that diversified funds do not have ....namely individual company risk plus market risk as well as utilities have a high amount of interest rate risk too . rising rates are the kryptonite to them since they run on so much borrowed money
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Yeah, but with the interest rates being knocked down so much, would think some utilities - like Duke would be good investments for the next few years. Its politics!

Think the world's largest battery maker now also needs a recharge...lol.
 
Liberty said:
Yeah, but with the interest rates being knocked down so much, would think some utilities - like Duke would be good investments for the next few years. Its politics!

Think the world's largest battery maker now also needs a recharge...lol.
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rates stand a pretty good chance of continuing their rise once this trade thing is settled . investors want more interest to take the risk of going out 10-30 years on bonds and it is investors who control bond rates not the fed.
 
mathjak107 said:
rates stand a pretty good chance of continuing their rise once this trade thing is settled . investors want more interest to take the risk of going out 10-30 years on bonds and it is investors who control bond rates not the fed.
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Yes, but with the feds being "beat on" to continue to "beat down" the rates, it doesn't look good for interests to rise unless the political sector changes.
 
Liberty said:
Yes, but with the feds being "beat on" to continue to "beat down" the rates, it doesn't look good for interests to rise unless the political sector changes.
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it is irrelevant what the fed wants when it come to bond rates ...that is why we have the inverted yield curve ...the fed wanted higher rates and investors did not see it that way so they bid bond rates lower than the feds rates for short term .

predicting interest rates is much harder than predicting the stock market . so betting on one outcome is very risky compared to a broad based fund .
 
mathjak107 said:
it is irrelevant what the fed wants when it come to bond rates ...that is why we have the inverted yield curve ...the fed wanted higher rates and investors did not see it that way so they bid bond rates lower than the feds rates for short term .

predicting interest rates is much harder than predicting the stock market . so betting on one outcome is very risky compared to a broad based fund .
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Door #1 investment grade bonds - Door #2 Junk bonds!
 
I use both ....I use short term high yield bonds as a less volatile proxy for some equities , not bonds .... I have assorted bond funds laddered the same way cd s are laddered as to when the money is needed ....
 
Had some extra fun money last year so decided to do a little over 1 year experiment of utility stock vs. CD. According to this calculator combined with yearly income still have to pay a small amount of capital gains tax.
Capital Gains Tax Calculator
https://smartasset.com/investing/capital-gains-tax-calculator#8tnTZYOaVG
The utility I bought 1000 shares of on 5/17/2018 was @$26.75. On 10/1/2018 2nd. dividend reinvested share total 1028.556

1/1/2019 1028.556 X.41 = $421.707 divided by 27.01 = 11.074 + 1028.556 = 1039.63

4/1/2019 1039.63 X .412 = $428.327 divided by 30.79 = 13.911 + 1039.63 = 1053.541

7/1/2019 1053.541 X .412 = $434.058 divided by 30.16 = 14.391 + 1053.541 = 1067.932

10/1/2019 1067.932 X .412= $439.987 divided by 31.31 = 14.052 + 1067.932 = 1081.984

sold on the open this a/m for $33.23
$35,954.32. - $26,750.00 = $9204.32


A $26,750.00 CD with 3 % rate. would return $802.50 That was used for only for comparative purposes.

The gain isn't exciting but putting $30,000.00 back in fun money and giving my wife the rest to blow on whatever she feels like made me some points.
 
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I don't have any utilities, but they are considered defensive and don't move much in bear markets, don't move much in any markets, but their dividends are good. I prefer ETFs with a broad base of stocks, such as SPY and QQQ. Here's a list I found of utility ETFs =

Top Utilities Funds
  • Fidelity® MSCI Utilities ETF.
  • Invesco S&P 500® Equal Weight Utilts ETF.
  • Vanguard Utilities ETF.
  • Utilities Select Sector SPDR® ETF.
  • iShares US Utilities ETF.
  • iShares Global Utilities ETF.
  • Invesco DWA Utilities Momentum ETF.
 
Utilities do have done well in the last three three years..some of them we have have more than doubled. Three are NEE, AEP and AWK have doubled. That does not include the dividends.

Its picking the right stocks. I do not do indexes.
 
I did incredibly well investing in separate utility companies. I bailed right before the crash of '08. My profits were great, just as my capital gains taxes were the opposite of great. :eek:
 
short term returns mean little . take ppl for example.

they are having a very good year up 21% ytd . but even with that and reinvesting all dividends, investors saw a mere 4.23% over the last 3 years and 4.94% the last 5 years as an average return , and that is only that high because they had a good year this year .

in contrast to a diversified fund like the s&p 500 which is up 21.86 ytd , 14% the last 3 years and 11.05% the last 5 years.

ppl has had some wild swings too so it isn't like you were spared. there is almost a 20% range in movement
 
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mathjak107 said:
short term returns mean little . take ppl for example.

they are having a very good year up 21% ytd . but even with that and reinvesting all dividends, investors saw a mere 4.23% over the last 3 years and 4.94% the last 5 years as an average return , and that is only that high because they had a good year this year .

in contrast to a diversified fund like the s&p 500 which is up 21.86 ytd , 14% the last 3 years and 11.05% the last 5 years.

ppl has had some wild swings too so it isn't like you were spared. there is almost a 20% range in movement
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That little over a year long contrast between A CD & investing was an experiment I wanted to try.

What works for you doesn't necessarily work for everyone. As part of a portfolio AND not needed to live on, but as a nice gift to our sons as an inheritance PPL works just fine.

If PPL stock fluctuation was a concern going from $39.00 & change to $26.00 & change would probably panic anyone. Since capital gain isn't the reason for buying & holding PPL stock It didn't matter. A little over three years ago we stopped reinvesting and had the dividend put into cash reserves. That works for us even though it jacked up our federal tax. At 45,774.677 shares divided 3 ways the way I look at it as getting anything as an inheritance beats getting a bill for putting parents in the ground. Planning ahead I've already told them to sell & use the 774.677 shares for legal expenses.

But all that might change depending on whether or not PPL merges with a Connecticut utility.
 
as i stated over and over , a dividend is no different than just drawing the same dollars from a portfolio of non div payers .. they both will have the same income , and the same balance as long as total return is the same ...so we are ALL in it for appreciation whether we want to be or not ..dividends are not like interest .

dividends are not on top of your balance like interest , your value invested is reduced by the amount paid or if reinvested it is exactly what you had before it went ex div ...

so when i see it repeated over and over by mis-informed people in forums that i want the dividends to live on and i don't care about appreciation , that is a myth that needs correcting . so while i am not saying you are mis-informed , many are .

you need at least the amount of appreciation as the payout just to have markets compound on the same amount you had or you have less invested

itr is no different than pulling 4% from a portfolio of non div payers and not seeing at least 4% in appreciation ... no matter what , in the end it is all about total return . some just are misinformed and think that somehow because they get a dividend they are no longer dependent on appreciation . they could not be more wrong .

personally if i wanted a lower volatility investment than 100% equities and less riskier than betting on the outcome of one company , a balanced fund like vanguard vbinx was a far better choice than ppl would have been . vbinx is 60/40

vbinx returned 9.53% the last 3 years , vs ppl 4.14

the last 5 years vbinx was at 7.72% , ppl 4.98%

the last 10 years vbinx was at 9.33% -ppl 5.30%

the last 15 years vbinx was at 8.18 -ppl 5.41

risk was way way less in vbinx compared to betting on one company.

this is a perfect example of why small investors left to their own devices don't do as well as they should have. short term trading is very different than long term investing . individual companies are fine for short term trading ... but if one is comparing long term investing than proper benchmarks need to be compared .

i made over 90k just trading in and out of gold , long term treasuries , a few individual stocks and funds and oil this year aside from my regular portfolio of funds which rarely change . but i would not compare this short term trading to a more diversified long term portfolio.

so i get what you are saying . you had a choice of a short term cd or doing something different with the money , the same as i had a choice of a short term cd or buying gold or long term treasuries and then selling out in a short time frame .

but no one should confuse fun short term trading with what they should be doing for their real long term investing.

there is no time frame except very short ones where buying a utility like ppl would have out performed a balanced fund and did so with less risk
 
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Some good points but you are pointing to one stock vs a fund.

Using your logic, one like me that depends on dividends to supplement our retirement would have to sell some stock for that income...nothing wrong with that but not my cup of tea.

I love to get a utility that pays a good dividend that goes up every year and the stock price also goes up. That is long term investing.

I believe in a diversified portfolio so utilities are only about 45% of it.
 
oldmontana said:
Some good points but you are pointing to one stock vs a fund.

Using your logic, one like me that depends on dividends to supplement our retirement would have to sell some stock for that income...nothing wrong with that but not my cup of tea.

I love to get a utility that pays a good dividend that goes up every year and the stock price also goes up. That is long term investing.

I believe in a diversified portfolio so utilities are only about 45% of it.
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Tax wise selling the dollars in stock or a fund is far more efficient then the company selling off a piece of your value and handing it to you. You are taxed on the entire dividend. Selling a bit of shares has you taxed only on the gain
 
"You are taxed on the entire dividend."

You are assuming that everyone pays Federal income taxes. Many that are retired do not. For the last few years we have not. We had our own business and instead of drawing large salaries we put money back into our business so we get only about $1,500.00 a month from SS. Our business was a corporation...we as individuals (not the corporation) owned the building our business was in....income from that we did not pay SS taxes. We sold the building.

Bottom line there are many different situations.
 
oldmontana said:
"You are taxed on the entire dividend."

You are assuming that everyone pays Federal income taxes. Many that are retired do not. For the last few years we have not. We had our own business and instead of drawing large salaries we put money back into our business so we get only about $1,500.00 a month from SS. Our business was a corporation...we as individuals (not the corporation) owned the building our business was in....income from that we did not pay SS taxes. We sold the building.

Bottom line there are many different situations.
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If you pay no taxes then either selling a share amount or them selling a piece of your share value is the same thing ...same cash flow ,same balance
 
Use utilities and utility funds for dividends and distributions-income. Every now and then tech related utilities experience bumps, spikes etc that make them a worth buy low sell high stock.
 
WhatInThe said:
Use utilities and utility funds for dividends and distributions-income. Every now and then tech related utilities experience bumps, spikes etc that make them a worth buy low sell high stock.
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That's what I'm waiting for right now...a nice low price on a good dividend paying utility stock!
If you know of any good buys out there now, please let me know. Thanks!
 
mathjak107 said:
If you pay no taxes then either selling a share amount or them selling a piece of your share value is the same thing ...same cash flow ,same balance
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I do not understand that. The fact is that a company decides what they do with their profits...they can use part of their profits to pay dividends, but back stock, or use profits to expand their business ..that could be buying another company or updating their generation plants etc.

The fact I pay no taxes is not because I am selling any of my stock.
 


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