Benefits Of Owning Utilities

By Bear Fight:Despite the year-to-date underperformance to the broader market, there are significant benefits to owning utilities in your portfolio. I think investors should stick with utilities due to their strong dividend yields and the potential for outperformance in a "risk-off" market. The markets experienced a strong rally in the first quarter of 2012, but since the beginning of April the broader market is starting to show real signs of weakness.

By Bear Fight:Investors who have flocked to dividend yielding equities have been treated to underperformance in early 2012. As the 10-year Treasury remains at a paltry 2.0%, investors have sought yield from equities including utilities. The equities below are large-capitalization U.S. equities that yield over 2.0% and trade at modest price-to-earnings ratios.

By Bear Fight:Just as yield famine investors have sought dividend paying equities as the Federal Reserve has driven down short-term interest rates, these equities are starting to underperform the overall market. Year-to-date, the S&P500 (SPY) has outperformed these popular dividend paying equities.(Click chart to expand)

By Bear Fight: << Return to Part I

By Bear Fight:Telecom equities provide investors with strong cash flow due to their stable recurring business models. Commercial and residential subscribers sign up for annual or long-term contracts, providing strong revenue visibility.

By Bear Fight:As equity markets show modest signs of weakness as the DOW approaches 13,000, long-term investors should build a "watch list" of equities to buy in a pull back. Investors have been treated to a strong year-to-date rally of over 6% for the broader market.

By Bear Fight:As investors face a weak and lackluster recovery with stubbornly high unemployment and high debt loads interest rates will likely remain low beyond 2013. Retirees looking for yield have sought dividend paying equities. Retirees should focus on large-capitalization businesses with market leadership positions and modest leverage.

By Bear Fight:Investors are fretting about stagnating equity market prices and a “lost decade” for the U.S. economy. Investors have already experienced their own lost decade in U.S. equities. While the 2000s ended with the bursting of the tech bubble and an overbought stock market, the last 10 years of no price appreciation helped valuation. (Click chart to expand)