Utility stocks were down Monday. Shocked? Yeah, I thought not. A wicked winter storm that tossed the Northeast like a salad over the weekend has consumers shivering and investors wondering whether to sell.
And yet this latest snowpocalypse is only partly to blame. Other factors influencing the sector's free fall include MF Global's bankruptcy filing, sharp declines in the yen, and renewed fears over the fallout of a European debt crisis. Call it a triple-witching hour. It was Halloween, after all.
A Crazy Bet? Or Crazy Like a Fox?
The storm itself is worth noting for its power. An early nor'easter dumped as much as 30 inches of heavy snow across the region from Saturday to Sunday. New York City expects to lose 1 million trees. As many as 2 million people were without power on Monday morning.
At least one utility, National Grid, which serves Massachusetts, said it was in "full restoration mode," MSNBC reports. Other regional grids include Northeast Utilities (NU) in Connecticut, Consolidated Edison (ED) in and around New York City, and Exelon (EXC), the holding company behind Philadelphia's PECO Energy.
You'd think these stocks would be in free fall with the severity of the power outage. Certainly there's going to be a cost to restoring electricity to so many homes. Interestingly, none of these names was moving even a full percentage point. Why? I suspect because it was the trees rather than the grids that failed. Restoring downed power lines isn't the same as restoring offline reactors.
Five Utilities to Shine the Light On
In fact, it's on panicky days like these that long-term investors want to be taking a second look at utility stocks.
Not only are they less volatile than fast-growing technology stocks that tend to flame out, some pay substantial dividends that yield more than the long-term cost of inflation. (Roughly 3%, for those keeping score at home.)
With that in mind, here are five utility stocks that have substantial U.S. operations and which the more than 100,000 participating in the Motley Fool CAPS investor intelligence database rate highly. Each also yields at least 6% based on current stock price, or double the average rate of inflation.
1. National Grid (NGG)
The same utility that's scrambling to restore service in Massachusetts is based in the United Kingdom. American investors needn't worry about that, though. Shares listed on the NYSE yield 7.6% as of this writing. The stock also sports a P/E ratio of 9.8, a sharp discount to the industry average.
2. Suburban Propane Partners (SPH)
As the name suggests, the company primary sells natural gas but also provides electric service to customers in New York and Pennsylvania. Suburban's line of whole house heating and propane products is also available in 30 states. The stock yields 7.2% as of this writing.
3. AmeriGas Partners (APU)
Though not a regional utility like National Grid, AmeriGas has national reach. You may even use one of its propane tanks to feed a gas grill. The company also services propane fuel products for home heating and motor vehicles, and the stock yields 6.6% as of this writing.
4. Inergy (NRGY)
Another propane distributor, only this one is based in Kansas City and also operates four natural gas storage facilities. The stock yields a breathtaking 9.8% yield, worth paying attention to since management has boosted the payout per share by more than 20% in each of the last four fiscal years, according to records kept by S&P Capital IQ.
5. PAA Natural Gas Storage (PNG)
Sensing a theme here? PAA serves electric utilities rather than acting as one itself. The company's natural gas storage facilities allow customers to keep energy on hand for distribution when needs arise. The stock yields 7.9% as of this writing.
To be fair, all of these companies save for National Grid are structured as limited partnerships that by law must pay out the vast majority of profits to "partners." Being a shareholder makes you a partner and that means paying taxes on the gains. Yet whether we're talking stocks or partnerships, the net effect is usually the same. High sustainable yields offer warm profits when the markets (and the weather) blow coldest.
Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Motley Fool newsletter services have recommended buying shares of National Grid and Exelon. Motley Fool newsletter services have recommended creating a write covered strangle position in Exelon.
Get info on stocks mentioned in this article: