I'm somewhat conflicted with the performance of these utilities. On the one hand, there seems to be a rising tide of people who want safety and dividends and dividend growth. Utilities have provided these. Even excluding this year's good performance of utilities, utilities have been very good ltb&h performers over many years (outdoing the S&P many, many times). So imo people have been right to be in utilities and may very well be right to stay with them and maybe continue investing or reinvesting (their dividends) in them.
It's just that if I look over my portfolio, the average p/e of my utilities is higher than the average p/e's of my tech stocks or health care companies --- sectors where I historically have seen and expect to see higher p/e's because of the expectation or actuality of these being growth stocks, i.e. one pays up (higher p/e) for higher growth.
It seems to be topsy-turvy now. Or can it be that the real growth is in utilities, and that there's been and will continue to be, a lack of growth in tech/health care,etc.? Maybe it's the new reality or maybe just the fashion of the times.
I look at ATO. I'll call it a utility because it has its regulated component. Current p/e is 18.7x and forward is projected at 14.9x (per Yahoo). The dividend yield is about 3.8%. That p/e is higher than stocks like AMGN, ZMH, GOOG, AAPL, and so many others that I hold. In my portfolio, the only tech stock I have that has a higher forward p/e than ATO is QCOM at 15.0x.
I just can't get my mental arms around these utility p/e levels to sit still for the situation. So for me, I take some ATO and others like it, off the table. Just saying how I look at it, what I am doing given my investing proclivities. |
