Our Outlook for the Utilities Sector

Utilities shed their 'safe-haven' trait in the first quarter.

Mar 26, 2008

Mentioned: Atmos Energy Corp (ATO) , Southern Co (SO) , Edison International (EIX) , Consolidated Edison Inc (ED) , PNM Resources Inc (PNM) , Sempra Energy (SRE) , Huaneng Power International Inc (HNP)

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Our utilities index has declined nearly 10% year to date, with regulated utilities carrying the outsized burden of the losses. Both relative and absolute factors have plagued the group recently, stripping it of the defensive badge it typically wears in periods of economic contraction. Relatively speaking, credit spreads have increased across many sectors, giving risk-tolerant, yield-seeking investors more choices from which to pick. Thus the relative attractiveness of stable dividends has diminished somewhat.

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Paul Justice does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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