Over the long term (since 1993), NV Energy, Inc. (NYSE:NVE)’s stock has under-performed the overall utilities index, increasing only at a compounded annual rate of 1% per year, lagging the market and not keeping up with inflation. It does pay a nice dividend of $0.76 per share and yields 3.2%.
The company has improved things recently with earnings growth in the double-digits since 2010. The stock is up too, mainly because of the recent buyout news. Revenue, however, has been decreasing.
Another utility having some issues right now is Dominion Resources, Inc. (NYSE:D), which supplies energy needs in Virginia and a section of North Carolina.
Earnings (-28%) and revenue (-5%) have been declining over the last few years. It can’t be considered a value play right now as the P/E ratio is approaching triple digits. In a bright spot, the company has been able to keep increasing its dividend in spite of the lack of growth. The stock has also dropped recently due to the uptick in interest rates.
So unless interest rates hold steady or drop, it might be wise to hold off on purchasing any utility stocks unless you can find a bargain out there. Rates will probably go up, especially when the Fed stops printing money.
If you have any utilities in your portfolio right now and typically hold for the long term, rates will probably stabilize at some point and you will probably continue to see the typical low growth and dividend payments that the industry has provided in the past.
The article Are Utilities a Good Buy? originally appeared on Fool.com and is written by Mark Morelli.
Mark Morelli has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and Dominion Resources. The Motley Fool owns shares of Berkshire Hathaway. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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