Are utility stocks safe? (2024)

Are utility stocks safe?

Stock dividends from utility companies often prove to outyield other fixed-income investments and have less volatility than other equities. Utilities tend to be very resistant to economic cycles because demand for utilities does not change much compared with most other industries, even in the deepest recessions.

Is utilities a good investment now?

Stable stock prices.

Unlike other riskier, more volatile investments, utility stocks offer very steady prices. Investing in individual stocks is still riskier than diversified index funds, but generally speaking utilities stocks are considered “safe” equity investments.

Will utility stocks do well in a recession?

When the hard landing hit the utilities sector's performance turned negative. However, against a backdrop of overall falling equity markets during a recession, utilities actually outperformed the S&P 500 across all of those hard landing scenarios.

Will utility stocks recover in 2024?

Growth outlooks and balance sheets are strong. Nearly every utility is rewarding investors with secure, growing dividends. Our top picks for electric, gas, and water utilities stocks are well-positioned for 2024.

What causes utility stocks to fall?

Interest Rates and Debt Levels

Of course, an interest-rate hike affects all businesses this way, but it's an especially important factor for utility companies because of their typically high debt levels. Major utility firms have major capital expenditures and high debt-to-market cap levels.

What utility stock is paying the best dividend?

Will higher interest rates hurt utility stocks?

Because of the high amount of debt, utility stocks are sometimes susceptible to crashes when interest rates rise. As interest rates rise, debt payments will also rise thus making some stocks within the utilities sector a poor choice for investment when the Fed decides to raise rates.

What stocks do worst in a recession?

Equity Sectors

On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.

When should I invest in utility stocks?

“When you see deceleration in GDP, that's a good time to invest in utilities. But if the economy is growing quickly, that's a bad time to invest in the sector,” Yoder said. “Higher rates create a more difficult backdrop for higher dividend sectors. When times are good, you want to invest in cyclicals.”

Do utility stocks do well during inflation?

The result is a durable earnings and dividend stream that has the lowest beta, a measure of volatility, of any other sector in the market. Additionally, during periods of elevated inflation and rising interest rates, utility stocks have generally outperformed bonds.

What stock will boom in 2024?

Are utility stocks a good long term investment?

Stock dividends from utility companies often prove to outyield other fixed-income investments and have less volatility than other equities. Utilities tend to be very resistant to economic cycles because demand for utilities does not change much compared with most other industries, even in the deepest recessions.

What is the outlook for utilities market?

2024 energy, resources, & industry outlooks

In 2024, electricity prices are expected to remain steady and sales are expected to rise about 2%,⁷ while supply chain snarls will likely continue unraveling.

What is the outlook for utilities stocks in 2024?

Final verdict. The utilities sector has plenty of stocks with attractive dividend yields and the possibility of generating robust long-term gains for investors. Utility stocks may be a particularly attractive option in 2024 given market expectations for falling interest rates.

What happens to utility stocks when interest rates rise?

However, investors should understand that prices of utility stocks can decline significantly over the short term (without a change in company fundamentals) due to increases in long-term interest rates.

Are utility stocks low risk?

When seeking out the best utility stocks, investors should focus on companies with scale and income potential. Utility stocks are probably not the most dynamic investments on Wall Street, but these solid companies do have a lot to offer low-risk investors.

What are the top 5 utility stocks?

What is the safest dividend paying stock?

Are utilities undervalued?

Utilities stocks also typically offer sizable dividend yields and, as a group, look 9% undervalued today.

Why are utility stocks doing so well?

1. Most investors flock to utility stocks for their dividends and low volatility. Consumption habits for electricity, water, and natural gas don't change much from one year to the next. This often leads to highly predictable operating cash flow and the ability for utility stocks to pass along market-topping yields.

Is it better to have cash or property in a recession?

Yes, cash can be a good investment in the short term, since many recessions often don't last too long. Cash gives you a lot of options.

Where is the safest place to put your money during a recession?

Treasury Bonds

Investors often gravitate toward Treasurys as a safe haven during recessions, as these are considered risk-free instruments. That's because they are backed by the U.S. government, which is deemed able to ensure that the principal and interest are repaid.

What gets cheaper during a recession?

Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment, may be more likely to get cheaper.

Do utility stocks pay high dividends?

As such, many utility stocks typically have dividend yields that are several times that of the average stock in the S&P 500 Index. Because of these favorable industry characteristics, we've compiled a list of utility stocks.

Are utility stocks defensive?

Utilities stocks are famously “defensive”. Utility companies provide essential everyday services like electricity and water; and while that means revenues and profits don't always grow rapidly, they do remain resilient during economic downturns.