The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Don't buy bonds; Buy utilities Date:  7/23/2011  11:12 AM
Author:  loveoldcars Number:  33116 of 36809

Utility stocks are among the top dividend payers in the market. While many investors discard utility stocks as boring investments, some companies in this sector returned outstanding profits to shareholders. In the last 15 years, Southern Company’s (SO) and Dominion Resources’ (D) shareholders enjoyed annual returns of 10.56% and 9.36%, respectively. In the same period, the S&P 500’s (SPY) annual return was only 6.97%. Performance of utility companies is mostly compared with long-term government and corporate bonds. Therefore, I decided to go back to 15 years and compare a diversified portfolio of 11 large-cap utility companies with that of bonds. I downloaded the dividend-adjusted data on utility stocks from Yahoo Finance. The data on Treasury Bills and Moody’s Seasoned Corporate Bond Yields is derived from the Federal Reserve Bank of St. Louis. Here is what I found:

Pretty convincing charts!

Notes: Like stocks, bonds can be bought well below par from time to time. Also, note that all stock dividends were reinvested! If the dividends had been taken and spent, the results of the utilities would have been considerably less.

Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us