No. of Recommendations: 3
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.

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No. of Recommendations: 3
Like every “bonds-versus-stocks” study, an apples-versus-oranges comparison is done in the article, with no attempt to answer why the latter asset-class offers more money. In a word (or phrase): REWARD IS PROPORTIONAL TO RISK.

My anecdotal studies suggest that the advantage of stocks over bonds is about 3.5x when the common and the debt of the same issuer are bought at the same time and later disposed of at the same time. For sure, there are exceptions in both directions. When I’ve bought advantageously, I’ve made as much as 100% a year, for multiple years, from some bond purchases. And I often beat the implied CAGR of the best utility return trotted out by the article. But, by and large, over long time frames and based on a widely and properly diversified basket of debt holdings, the returns from bonds --as an asset-class-- are going to be sub-10%, just as will be that of utility stocks. That’s just the nature of each of them, on average and over the long haul. This isn’t to say the article is worthless. No attempt to make asset-class and investing-strategies comparisons and to discover better ways to put money to work is a waste of time. But selectively picking the data to spin conclusions is irresponsible journalism. It's fun to write and fun to read, but financial fluff rather than serious investigative work.

Ques: If utility stocks are good for one’s account, might utility muni bonds be good, too, or at least offer a yield-advantage over other debt types that might be attractive?
Ans: That’s an area where I’ve been doing a lot of buying lately. (Your Mileage May Vary. LOL)
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No. of Recommendations: 1
Can you give me some utility muni bonds to research? I have never looked into them and would like to do some research.
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Charlie, Can you give me some utility muni bonds to research? I have never looked into them and would like to do some research. TIA


I just got back from a two-week vacation. So I have no idea what markets are doing, or why, other than they seem to be in a panic (yet again) about long-standing problems that Congress (and the President) have no intention of solving, like spending as much money as they can borrow, never mind repaying those loans. But here’s a quick answer to your question about which utility munis to research. Any reputable bond-broker will offer its customers a bond-search engine that can select for the following subsets:


If your target is utility munis, then first grind through each of the categories for all states to get an idea of what’s broadly available in each category, then narrow your focus to what seems worth researching further with this in mind. All bonds (a cover term for bills, notes, bonds) from any issuer (including the US Treasury Dept) are no more than well-meant promises they hope to be able to keep. In other words, in investing, there are no guarantees despite any label that is used. So as a bond-investor, your concern is the strength of the issuer’s assets and financial activities relative to the reward they are offering for the risk of lending them money, and your task is to identify your competence and comfort zones and to stay within them, never mind what anyone else might be doing. E.g., if default-risk is your chief worry, then stay away from it and accept the fact that YOU WILL ALWAYS LOSE MONEY (aka, purchasing-power) on average and over the long haul due to inflation on anything you buy. In other words, “Safe” isn’t safe when all things are considered. So get used to paying a very high premium for that putative safety of principal.

OTOH, if inflation-risk is your main concern, then accept the fact that you will pay a different sort of premium and take some serious hits to capital matter how carefully you shop, but that your net-gains (after taxes and inflation) could be positive. (In other words, “Risky” isn’t so risky after all when all things are considered.) Below are some utility and industrial muni bonds I’ve bought in the last two months, where YTM is my tax-adjusted YTM, not the nominal YTM, and P/L is the difference between my entry-price and where I’m currently being marked to market at. As you can see, I'm up on some, down on some, but that my yields suggest that I bought shrewdly, doing the classic, value investing thing of getting in as advantageously as possible relative to the current market, which is definitely not cheap.


Aa2 AA 4.750 06/15/28 6.8% 4%
Aa3 AA+ 0.000 01/01/32 6.1% 3%
Aa3 A+ 0.000 12/15/31 6.3% -1%
A1 A- 5.250 01/01/34 8.3% 8%
A1 NR 4.750 08/01/28 7.1% 0%
Baa1 BBB+ 4.500 10/01/32 9.5% 8%
Baa1 BBB 6.000 09/01/29 8.3% 2%
Wr BB+ 4.000 03/01/14 8.0% 7%
Nr NR 4.375 09/01/32 8.0% 1%
Wr NR 5.000 01/01/27 7.6% 0%
Nr NR 4.500 01/15/18 13.0% -4%

The issuers don’t matter, nor do the specific activities each engages in (water, sewer, electric generation, etc.). What matters to me is that I’m attempting to spread my risks (all of them, not just default-risk) as widely as possible, so that I can sustain the inevitable damage I might suffer and still increase my purchasing-power. In other words, due to the difficulty of chopping left-hand bond tails, I seek exposure to right-hand tails as my compensating off-set. What I make on average and over the long haul across the whole portfolio is what matters to me, not the fact of never losing nominal principal on any specific position. If you contrast this approach to bond-investing with that advocated by Lokicious and the 'Savers' crowd, you can judge for yourself which has proven the wiser, more effective path over the past last decades.

Good luck with the exploring and shopping.
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