Today's eMail sent Free to AbetChichi2 Subscribers 11/11
*****************************************************
eWave and MajorMoves Comments for 11/11 by Chichi2**
siliconinvestor.com
===================================================================
Generic posted DOW Utility Charts - "Late stage of DOW Theory"
(chichi2 - DOW stages sometimes to watchers, Last, a Long time)
siliconinvestor.com
siliconinvestor.com
===================================================================
Dow Utilities and Interest Rates
One of the reasons market analysts follow the Dow Jones Utilities so closely has to do with its perceived relationship to interest rates. According to the experts that study the averages, a rise in utility stock prices means that investors are anticipating falling interest rates, while a decline in these stock prices means that interest rates are rising. There are two theories behind why this happens.
The first has to do with the amount of borrowing, or financial leverage, that utilities use to support all their capital investments. When interest rates are declining, the interest expense on all that borrowing goes down and the profitability of utilities is enhanced. This makes these stocks more attractive to investors.
The second theory that links the rise and fall of the Utility Average to interest rates has to do with the typically high stock dividends that utilities pay. In fact, we recently reported that 73% of the Utility Index stocks were paying dividends over 3.25%, compared to just 37% of the Industrials Index. When interest rates are falling, the dividend yields of the utilities become more attractive to those investors seeking a steady source of income, thereby driving up the price of utility stocks.
-------------------------------------------------------------------- |
