logo
  Join        Login             Stock Quote

Utility Dividend Stocks Are Boring But Stable

 December 13, 2010 12:21 PM


When the market gets rough, people turn to the old standbys, the stocks that hold value and pay dividends in rough times. These include some stocks considered boring, such as utilities. Though they may not be the most exciting stocks in the world, there are aspects of utilities that make them very attractive, the best of which may be the dividend component.

While banks are paying out one percent or lower dividend yields, many utility stocks have yields of four percent or higher. Investors still receive these dividend payments while they are waiting for the market to rebound. However, this is only the case if the stock continues to pay dividends as anticipated and this is where utilities shine.

In their market areas, utilities usually have a monopoly. Since their cash flows are both predictable and steady, utilities do not have trouble obtaining financing and they are unlikely to experience financial issues when the economy is performing poorly. This means that while the share prices of utilities may drop, a reduction in dividends is rare. In addition, the share price will usually bounce back once the market recovers.

[Related -Buffett's Market Indicator Flashes Red, Prepare To Sell]

Investors can use tools like the free stock screener from Morningstar to find profitable and financially stable utilities that pay dividends of at least four percent. When using the tool, they should select stock grades of C or higher. Few utilities get grades as high as B when it comes to both financial health and profitability.

As a double-check mechanism, investors can use return on equity as another measure when using the stock screener. Selecting a ROE of at least 15 percent is recommended because this is the figure frequently used by money managers. Once the parameters are entered, the investor can view the results and conduct further research on the utilities listed to determine if any represent a wise investment.

iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageBuffett's Market Indicator Flashes Red, Prepare To Sell

With each passing month, it's becoming evident that the current bull market has slowed from a gallop to a read on...

article imagePBoC joins other major central banks with unconventional monetary policy action

Softer than expected economic growth in China (see discussion) has finally spurred the PBoC into action. read on...

article imageA Buyback Boost?

Are stock buybacks the only thing keeping this bull market read on...

article imageGold Slides On Perfect Storm For Dollar

For all the anticipation surrounding the delivery of the Fed’s statement in the run-up to the September read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

A Buyback Boost?
More Articles on: Finance



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.