EKS, I like that you are considering your exit strategy. That's better than what I'm doing, which is I'm only guessing I will want hold these stocks for several years. I like your idea of exiting when the dividend yield drops (because the stock price has risen). I'd say 3% is an okay bogey too. The thing is that some of these stocks yield close to 6% and some have rising dividends, so that it may take a while (if ever) for some of these stocks to rise enough to drop the yield to 3%.
As I said in an earlier post, I'm not so sure about revision-to-mean p/e as a good basis. The utility stocks were deregulated, people had high expectations, bought in, and raised the general p/e levels. Appears to have taken several years (a decade?), but now some sort of reality or realism or expectation level exists it seems to me, where people don't view utilities as having such good growth prospects and so not worth the higher p/e's of the past few years. We seem to be back to the older 9-11 p/e level vs. the recent 15x level (which I view as growth territory). Whether this "new" p/e level now correctly reflects utilities' prospects, I don't know.
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Aside: in reviewing past posts I see I didn't respond to an interesting post you made regarding Canadian utilities. I had not considered this sector a possibility, and I'm not following any now. Also, I don't know about the tax consequences for USA holders of Canadian utilities. I read where the Canadian utilities in a USA ira might not have to pay the Canadian withholding tax: I don't know how that would work though. For the Canadian stocks I have in my taxable account, my accountant prepares a Form 1116, a complex thing that's incomprehensible to me. |
