The time may be ripe for investing in utility stocks.
Electric utilities have been yielding three times as much as industrial stocks in the Standard & Poor's 500 Stock Index, largely because of the 30% drop in utility prices since last fall. The average yield on those stocks is 7.5% vs. 2.5% for industrial companies.
"Electric utilities may not have been worth what investors were paying in the summer of 1993 but they are worth a lot more than they are trading for now," said Andrew St. Pierre, manager of the John Hancock Utility Fund, who like other utility fund managers has been adding to his holdings.
"We expect stocks as a whole to increase a little below average for the next few years, perhaps 9% a year. If you can buy utilities with a 7% yield and a dividend growth rate of, say, 2%, you will get to the same place but with much less risk," said Robert Christensen, manager of the Liberty Financial Utilities Fund.