|
Utilities
Jul 1, 2023 18:16:17 GMT
via mobile
Post by chang on Jul 1, 2023 18:16:17 GMT
FSUTX is down -3.12% YTD. fundresearch.fidelity.com/mutual-funds/performance-and-risk/316390509I’ve held this in my IRA for a few years. Within its category it’s a standout fund, but I’m wondering whether it makes sense to maintain a permanent allocation to utilities. My intent was to achieve some diversification, a little income, and inject a little stability and anti-volatility to balance some of the quirkier holdings in the account. I actually moved a few dollars from LCG to FSUTX a little while ago. Just a tweak. Anyone else holding utils as a permanent fixture? How does the future look?
|
|
|
Post by yakers on Jul 1, 2023 18:47:29 GMT
I have a small holding in VEU which I aquired a long time ago and just haven't paid much attention, looks like FSUTX is better and VTI/VOO even better.
|
|
|
Utilities
Jul 1, 2023 18:51:32 GMT
via mobile
Post by chang on Jul 1, 2023 18:51:32 GMT
VEU? Or VPU?
|
|
|
Utilities
Jul 1, 2023 20:32:50 GMT
via mobile
Post by yakers on Jul 1, 2023 20:32:50 GMT
VPU,
|
|
|
Post by retiredat48 on Jul 1, 2023 23:00:01 GMT
I see dilemmas in owning utilities that is hard for me to get past.
OTO Hand...utilities should benefit in the move to electric vehicles. Need more electricity...for various reasons. Period.
OTOH...utilities will have massive cap X spending needs to construct any new (and green) power generating facilities. All at much higher interest rates than past decade. Thus a current annual expense that will not be recouped for a long time...until new power is generated.
And woe be to any utility who tries to increase their dividend during this construction phase, or even after. Utilities are regulated, and the regulators will be like Liz Warren: "You can't earn more money on the backs of poor rate payers!" Inability to increase dividends is like having your company taken away from you...like rent control.
R48
|
|
|
Post by bizman on Jul 2, 2023 2:03:41 GMT
I have a 13% of equities stake in VPU on the thesis that regulators will have to allow attractive ROEs for future projects or they won't get done. Not that I have faith in Liz Warren to be sensible, but it's hard to get blood from a turnip, and I don't think the federal government wants to put these investments on the government's balance sheet. Then again, stupid, crazy behavior seems to be epidemic these days. I console myself with the fact that David Giroux also likes the outlook for utilities as shown in this quote from a recent Barron's article written 6-2-23: "Another low-risk way to play climate change is utilities. They are making huge investments in transmission as well as in solar and wind. They are taking what may be 100-year-old pipes that leak methane into the atmosphere and upgrading them. Over the next 20 years, probably every coal plant in the country will be shut down. You’ll be left with nuclear, wind, solar, hydrogen, and battery storage. That will really be how we generate power. As utilities rebuild our infrastructure, that will allow them to grow their rate base at a healthy clip. People think about utilities as being low growth with nice dividend yields. But you are going to see a lot of utilities grow earnings, and the best can deliver 9% to 10% total returns between earnings-per-share growth and dividends. Ameren (AEE), Xcel Energy (XEL), Exelon (EXC), CenterPoint Energy (CNP), WEC Energy Group (WEC), NextEra Energy (NEE), and DTE Energy (DTE) are best positioned to consistently deliver that impressive level of total return. There’s a 20-year positive story for utilities as they transform how they produce power and reduce emissions. It is a really underappreciated multiyear, multidecade story. It also feeds into the EV story. As you go from filling up your car at a gas station to filling up your car at a renewable station, it actually improves utilization of utilities and lowers bills on a per-unit basis. It’s a really good 20-year story whether you look at it from an EV or climate-change perspective." Inflation Is Overhyped, Says This Pro. 4 Things That Really Matter for Investors.Edited to add:More thoughts that came to me after I posted. Utility investments are funded roughly 50/50 debt and equity. Let's say the government forces utilities to eliminate their dividends. That will crush stock values. That makes new investments uneconomic as they either have to offer huge gains (at huge ROEs) to fund new equity, or pay usurious rates to sell debt. Could they even fund the debt at any interest rate if there was no capital contribution backed up by an attractive dividend to attract it? I doubt it, without some sort of at least de facto nationalization, if not the real thing. And again, I can't see Liz Warren wanting to fill the federal balance sheet with obligations that would crowd out the ability for bigger and bigger social programs and such. So how do they drive the investment needed to electrify everything without allowing attractive dividends and total returns backed by attractive ROEs to attract new equity investments? Now I fully expect that after the transformation of the grid and economy is accomplished, there will be a huge temptation to demagogue the evil members of Big Utility, but doesn't that have to wait so they can change the world first? Mr. Giroux sees a 20 year runway for growth, so I don't think it's a problem for quite a while. But then this assumes rationality by all parties. So I suppose it's a coin flip in today's nutty world.
|
|
|
Post by yakers on Jul 2, 2023 4:13:30 GMT
My largest single stock holding at 4% of portfolio is WEC, just bought more this week when it goes down. Had since DRIP days directly. Just suits me. Transferred/ gifted $10k in stock to son for his wedding last year, not much income so no tax. IMhO utilities are good for the long run, maybe not for traders.
|
|
|
Post by oldskeet on Jul 2, 2023 12:44:02 GMT
Hi guys. As compared to the S&P500 Index I am better than double weight Utilities at about 6.5% due to their income generation. In addition, their dividends are classified as qualified by the IRS and are taxed at a more favorable rate over ordinary dividends. So, untill things change I plan to stay overweight in them as well as other good dividend paying sectors.
|
|
|
Post by chang on Jul 2, 2023 13:12:24 GMT
|
|
|
Post by yogibearbull on Jul 2, 2023 13:29:19 GMT
MANY years ago, utilities were for income. Remember that VG Wellesley Income VWINX started out in 1970s with mostly utilities stocks and long-term bonds. Those who think that it doesn't change, should review of its history of changes in stock and bond portions.
So, when many utilities became growthy, things changed. Now you have income utilities (mostly regulated business), growth utilities (unregulated business), those heavily in renewables, etc.
So, look under the hood and not just use index such as XLU.
|
|
|
Post by anovice on Jul 2, 2023 13:54:41 GMT
|
|
|
Post by retiredat48 on Jul 2, 2023 15:02:21 GMT
bizman,...Hi..good post. I too have read the Giroux (disclosure: I own some) outlook. I plan a post on another thread about his current outlook, namely, he lists five or six theme areas and in at least half of them, I am not so sure. Like utilities. Giroux states nothing that this is an investment utilities HAVE TO MAKE...have to spend all this cap X to add new generation. At what cost? Borrowing costs going way up as simple demand needs by, eg, gvt to fund debt with safe treasuries will crowd the market. Stock issuance? dilution. at best you maintain a dividend. The vocal regulator demands will be huge. And what about the risk of COMPETING power sources...like oil/gas. Think they are going away? Then can respond by LOWERING prices, making much of green energy non-competitive. Saudi oil in the ground cost was $0.50/barrel...they can lower prices a lot! Pressure will be on to perhaps build nuclear, which is very high initial cost. Wind turbines now showing shorter life expectancy than originally forecast. And so on. It's why utilities are a mixed bag for me. R48
|
|
|
Post by bizman on Jul 2, 2023 15:38:25 GMT
MANY years ago, utilities were for income. Remember that VG Wellesley Income VWINX started out in 1970s with mostly utilities stocks and long-term bonds. Those who think that it doesn't change, should review of its history of changes in stock and bond portions. So, when many utilities became growthy, things changed. Now you have income utilities (mostly regulated business), growth utilities (unregulated business), those heavily in renewables, etc. So, look under the hood and not just use index such as XLU. Good point yogibearbull, Recent Top 10 for VPU: NextEra Energy 13.93% Southern Co 7.14% Duke Energy. 6.45% Sempra Energy 4.23% American Electric Power 4.01% Dominion Energy 3.94% Exelon 3.70% Xcel Energy 3.37% Consolidated Edison 3.03% Public Svc Enterprise Group 2.79% I used to own several individual utilities, cut down to AEP, until I sold that over the last few months as I have less confidence in their management issuing shiny, happy guidance despite regulatory issues especially in Kentucky which have been adverse. I just decided that I'd get my exposure from the sector fund rather than make a big bet on any particular utility and their management and future positive relations with their regulators. While nothing is guaranteed, NEE is considered to be the classic growth utility going all in on renewables. Southern seems to have gotten mostly past their Vogtle nuclear construction issues. I'm not nuts about Dominion and their management and regulatory relations, but it's a 4% position. Going with the index is my attempt at modifying Ray Dalio's idea about just letting the "economic machine" do its work, though I've decided the utility sector is a reasonable place to bet. Now I'm not married to this position. If everything goes into the dumper and it looks like policy will drive regular rolling blackouts in the winter throughout the country or something, or if Bernie Sanders is elected President with a veto proof majority or something, I will likely dump it like yesterday's news. If the facts change, I will change my mind. But nothing including AI is completely without risks and potential downsides, if only on entry price.
|
|
|
Post by bizman on Jul 2, 2023 15:47:05 GMT
bizman ,...Hi..good post. I too have read the Giroux (disclosure: I own some) outlook. I plan a post on another thread about his current outlook, namely, he lists five or six theme areas and in at least half of them, I am not so sure. Like utilities. Giroux states nothing that this is an investment utilities HAVE TO MAKE...have to spend all this cap X to add new generation. At what cost? Borrowing costs going way up as simple demand needs by, eg, gvt to fund debt with safe treasuries will crowd the market. Stock issuance? dilution. at best you maintain a dividend. The vocal regulator demands will be huge. And what about the risk of COMPETING power sources...like oil/gas. Think they are going away? Then can respond by LOWERING prices, making much of green energy non-competitive. Saudi oil in the ground cost was $0.50/barrel...they can lower prices a lot! Pressure will be on to perhaps build nuclear, which is very high initial cost. Wind turbines now showing shorter life expectancy than originally forecast. And so on. It's why utilities are a mixed bag for me. R48 retiredat48, I understand your concerns and share them to an extent about utilities. If the climate change transition goes badly, it could devolve into recriminations and regular rolling blackouts in the winter. As I indicated above, this is not a buy and forget position for me. If economic, regulatory, political or other changes are adverse to the industry, I will likely cut bait. It's just that there is a bull and a bear case for every investment, and at the moment very little looks completely without a bit of hair on it, whether from potential problems or entry price. I believe you own VIG and so do I. Nothing much looks incredibly attractive to me at the moment. I'm just trying to make reasonable bets that seem likely to payoff with reasonable probability and not blow myself up. Which is harder than it looks. Especially in today's crazy world. Good luck to us all!
|
|
|
Post by anitya on Jul 2, 2023 17:29:38 GMT
I like Energy and Utilities combined into one fund. Others can comment on the commodity effects on these equities but if one is concerned about high volatility of Energy equities, this combination dampens volatility. I was hoping to see an ETF equivalent of that Vanguard fund but did not. I have not studied the Vanguard fund. I use combo FIF when ever I get an itch for an energy fund.
|
|
|
Post by anitya on Jul 2, 2023 17:38:29 GMT
May be someone with Utilities equity investing experience can comment on whether regulated or unregulated utilities are a better equity investment in a higher for longer rate environment.
I know in a falling rate environment since 1999, both did well. Utilities may have outperformed SPY as of end of 2022.
|
|
|
Post by catdog on Jul 3, 2023 2:58:40 GMT
Chang,
I owned FUTY which is an ETF cousin for 3 three years. Sold it as part of equity cleansing in Nov 2022. It has .08 er and a little higher yield. Bought it cheap, but still had to wait quite a while for it to recover. Utilities feel like a bond fund, but I would buy FUTY again.
Catdog
|
|
|
Post by rhythmmethod on Jul 3, 2023 15:34:29 GMT
I have no idea if utilities will go up or down near/intermediate future. UTG is my principle play in this space. I'm down about 4% in price but have been receiving the 8+% dividend monthly for ~20 months. Having a position in utilities for the >50 crowd make sense, IMO. I plan to add a little more when/if UTG < 28. Take care, -RM
|
|
|
Post by gman57 on Jul 3, 2023 20:05:48 GMT
I have no idea if utilities will go up or down near/intermediate future. UTG is my principle play in this space. I'm down about 4% in price but have been receiving the 8+% dividend monthly for ~20 months. Having a position in utilities for the >50 crowd make sense, IMO. I plan to add a little more when/if UTG < 28. Take care, -RM The fact that UTG has never cut its dividend and only increased it since its beginning is icing on the cake.
|
|
|
Post by richardsok on Jul 3, 2023 21:20:24 GMT
I have no idea if utilities will go up or down near/intermediate future. UTG is my principle play in this space. I'm down about 4% in price but have been receiving the 8+% dividend monthly for ~20 months. Having a position in utilities for the >50 crowd make sense, IMO. I plan to add a little more when/if UTG < 28. Take care, -RM The fact that UTG has never cut its dividend and only increased it since its beginning is icing on the cake. Just a heads up, g. I'm seeing only about 50% or less of recent UTG distributions have actually been coming from earned income. Looks to me like they have been spooning out long term cap gains to maintain the payouts.
|
|
|
Post by gman57 on Jul 4, 2023 2:40:14 GMT
The fact that UTG has never cut its dividend and only increased it since its beginning is icing on the cake. Just a heads up, g. I'm seeing only about 50% or less of recent UTG distributions have actually been coming from earned income. Looks to me like they have been spooning out long term cap gains to maintain the payouts. Thanks. Yes, they've been doing that since about 2014-2015. It's a managed distribution CEF. Quite a track record for any CEF I know of to never have cut the dividend.
|
|
|
Post by bizman on Jul 31, 2023 0:15:58 GMT
Just thought I'd add a quick note on an article in the WSJ about Elon Musk advocating for much more building of electric generation capacity. After electricity demand growing 1% per year for a long time, the CEO of Edison International thinks it may be up 60% in California by 2045, but Musk thinks it will be much higher and predicts U.S. electricity demand will triple by 2045. Either number is a big increase in the growth rate, which should require tremendous investment to build new plants while closing the remaining coal plants and (potentially) even some nat gas generation desired by much of the political class. Not that the transition may not be screwed up or simply unrealistic, but all of this would seem to bode very well for utilities needing favorable regulatory treatment to fund all of this Capex over the next couple of decades. Elon Musk’s Latest Mission: Rev Up the Electricity IndustryEdited to add:McKinsey also projects U.S. electricity demand will double by 2050.
|
|
|
Utilities
Dec 19, 2023 14:38:07 GMT
via mobile
Post by chang on Dec 19, 2023 14:38:07 GMT
Fido published this article last week: Utilities: A bright long-term outlook"The sector sports compelling valuations and a tailwind from renewables." www.fidelity.com/learning-center/trading-investing/outlook-utilitiesIt's not really as promotional or biased as the title sounds. The author (who does manage their utilities fund) presents both sides of the coin. I don't like the general idea of investing in a company whose revenues are regulated by the government. But with all the Mag Seven mania out there, I'm going to keep my holding and see what happens.
|
|
|
Post by johntaylor on Dec 28, 2023 18:38:38 GMT
Some estimates are that double -- or even triple -- the electricity might be needed by mid-century.
Meanwhile, a "Maine state environmental agency delayed a vote to approve a sweeping electric vehicle mandate because a storm caused widespread power outages."
|
|
|
Post by chang on Jan 20, 2024 20:00:05 GMT
A rash of recent analyses of utilities in 2024. A few examples below. Most of them have positive headlines, but they hedge their bets depending on which way factors A, B, C, and D go. In other words, utilities could go up, or perhaps not. Either way, though, a crash doesn't seem likely.
2024 utilities sector outlook brings three key opportunities"Despite an established landscape of challenges, several developments have enabled confidence in utility decision-making moving forward." www.ey.com/en_us/power-utilities/utilities-sector-outlook
Utilities: Will the Sector Reset or Repeat In 2024?"We think utilities are better positioned going into 2024 to produce the steadier positive returns that investors expect." www.morningstar.com/stocks/utilities-will-sector-reset-or-repeat-2024
Powering the Future: Prospects and Challenges in the Utilities Sector for 2024"Utilities, facing significant macroeconomic headwinds in 2023, have seen relative valuations fall precipitously, offering opportunity in 2024." www.dpimc.com/articles/powering-the-future-prospects-and-challenges-in-the-utilities-sector-for-2024
|
|
|
Post by archer on Jan 20, 2024 22:55:51 GMT
PG&E is continuing to raise rates to customers with another large rate hike for 2024. The 2024 hike is to fund many miles of underground lines to replace aged above ground fire hazards.
While the PUC has some power over the utility companies, they do still have a monopoly (thus the justification for the PUC), and are not being tightly enforced to do the upgrades. PUC controlled utilities have raised rates over the years and let infrastructure deteriorate, contributing to profits. So, I don't see the PUC as being much of a detriment to earnings.
It will take years for the infrastructure to be brought up to date, and until then the cost of upgrades will be at the expense of profits. There is a timing factor as to when the upgrades turn a profit. An investment manager I know told me a few years ago that he was putting money into a cruise line (Can't remember the name) because they had just replaced their boats, and all the other cruise lines boats were reaching end of life and would need to spend for replacing. IIRC the time to invest was near the time of completion. Perhaps the same for utility upgrades.
|
|
|
Post by anitya on Jan 21, 2024 1:58:40 GMT
chang , Unfortunately, with Utilities, one has to make the rate bet way too much. Extreme outcomes possible. Are Staples a better bet to avoid extreme outcomes? archer , Unfortunately, every company with pricing power that I thought were A holes have increased their stock price better than their industry average. The clean energy generation fees in my PG&E bill is the same as or higher than my monthly electric charges.
|
|
|
Post by chang on Jan 21, 2024 8:46:53 GMT
chang , Unfortunately, with Utilities, one has to make the rate bet way too much. Extreme outcomes possible. Are Staples a better bet to avoid extreme outcomes? If rates stay where they are and cuts are pushed back, then yes I think utilities will flounder. Maybe one should wait until rate cuts actually get underway. On the other hand, the market looks ahead...
|
|
|
Post by chang on Feb 23, 2024 3:00:57 GMT
Ugh. Is there any point in holding a utilities fund?
|
|
|
Post by Chahta on Feb 23, 2024 11:01:48 GMT
Ugh. Is there any point in holding a utilities fund? Why was your reason for buying? If it was TR or income and it is not providing either to your satisfaction, then move on. Personally I see no reason to own one since there are too many other options for income.
|
|