Utilities may be considered boring, but they’re worth having in your portfolio

Julie Brownlee, Fsp Invest, 17 Sep. 2015

Tags: utilities, what are utilities, utility stocks, utility sector, investing in utilities, defensive stocks,



Utilities are companies that provide electricity, gas and water.

These stocks may be involved in production or they may provide a service relating to the production of utilities.

So are stocks in the utilities sector worth investing in? And where can you find them?

Read on to find out…



The merits of investing in utilities


Many investors view utilities as one of the ‘boring’ sectors on the stock market. But utilities can make a great addition to your portfolio.

This is because utility stocks are defensive. Regardless of what’s going on in the wider economy, people still need electricity, gas and water.

This means these stocks don’t tend to suffer from the ups and downs you see in other stocks which are more dependent on the economy doing well. These more economy driven stocks are called cyclical stocks.

Another advantages of utilities is they tend to pay good dividends yields too.


Where can you find utilities to invest in?


In South Africa, utility providers, such as Eskom, are state controlled. This means you can’t invest in their shares.

You need to look further afield to find utility stocks to buy. You could consider looking to the UK or the US where there are many different utilities to choose from.

There are also exchange traded funds (ETFs) that concentrate on utilities.

By investing in a fund focused on the utilities sector, you gain exposure to the performance of the sector as a whole rather than specific companies. This removes the need for in-depth company research.

So there you have it. Why utilities are worth having in your portfolio.

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