SOURCE: Rothman Research

Rothman Research

April 15, 2010 08:33 ET

Why Utilities Are Still Attractive

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 15, 2010) - - Many investors love utilities during tough economic environments as these plays often act as a safe haven through their earnings consistency, elevated dividend yields and virtual stability. However, as economic recovery starts to kick in, utilities companies have a tendency to linger at the very beginning as investors move back to rapidly rising equities. One of the major hurdles for the sector has been a decline in demand as many of their customers have cut back on electricity. Arguably, however, a recovering economy generally means a regain in industrial activities that ultimately signify an increase in demand. Recession or not, one thing that makes utilities stocks attractive is their ability to pay high dividends. One such company that recently announced a 6% dividend in a very low-yield market is Progress Energy Inc. (NYSE: PGN).

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"Another electric utility company that has performed quite well in recent months is Great Plains Energy Incorporated (NYSE: GXP). The company managed to drive enhanced income by introducing new retail rates in Kansas and Missouri amongst others, which assisted in counteracting the negatives of lower consumption," commented Jack Benassi of "No wonder it received an upgrade from S&P."

This week has a number of economic data that could help investors' sentiment move towards a more stable bullishness. There have been some promising earnings reports in some key areas that could signal a more sustained economic recovery, but many will wait for key inputs from the jobless claim reports and the industrial production outlook to start rejoicing. 

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