The utility sector is usually considered as a stable sector that offers slow or no growth and strong dividends. For this reason it is one of the sectors preferred by income investors. The industry is regulated and its very rare for a company to fail. One such case was the crash of the Hawaiian Electric Industries stock a while ago. According to a recent article I came across at Capital Group the utility sector could be the next growth. The authors of the piece discuss their theory based on the following three reasons:
Aging electric grid needs an overhaul
Utilities are powering the AI boom
Made in America: Reshoring ignites energy demand
A brief excerpt from the article:
Here’s why utilities, long known as reliable dividend payers, shouldn’t be ignored by growth investors.
For investors interested in individual stocks, the following list offers a good starting point for further research:
1.Company: Consolidated Edison Inc. (ED) Current Dividend Yield: 3.21%
2.Company: NRG Energy (NRG) Current Dividend Yield: 1.87%
3.Company: Edison International (EIX) Current Dividend Yield: 3.65%
4.Company: Portland General Elect. Co. (POR) Current Dividend Yield: 4.19%
5.Company: Sempra (SRE) Current Dividend Yield: 2.98%
6.Company: Southern Co. (SO) Current Dividend Yield: 3.21%
7.Company: Duke Energy Corp. (DUK) Current Dividend Yield: 3.59%
8.Company: Entergy Corp. (ETR) Current Dividend Yield: 3.50%
9.Company: NextEra Energy, Inc. (NEE) Current Dividend Yield: 2.49%
10.Company: American Electric Power Co., Inc. (AEP) Current Dividend Yield: 3.45%
Note: Dividend yields noted above are as of Sept 20, 2024. Data is known to be accurate from sources used. Please use your own due diligence before making any investment decisions.
There are about 50,000 companies trading on the organized exchanges of the world according to an article by Ashley Owen of OwenAnalytics. China has the highest number of companies at over 5,000 followed by Canada and the US. On a per capita basis, Canada tops the ranking at 113 per million followed by Australia at 75 companies per million population. The main reason for the high number listings in the relatively small economies of these countries is that both are resource-based economies and thousands of mining companies trade on the exchanges.
Earlier this Houthi rebels in Yemen attacked ships on the Red Sea. This caused many shipping firms to re-re-route their ships around the Cape of Good Hope instead of via the Suez Canal. According to LSEG Shipping Research, the alternative route takes an extra up to two weeks and adds an additional fuel costs of an estimated $1.0 million per sailing on trade between Europe and Asia.
The following map shows the Suez Canal vs. Cape of Good Hope route:
The U.S. is one of the large crude oil producing countries in the world. According to the EIA, the top five countries in 2022 were the US, Saudi Arabia, Russia,Canada and Iraq.
In the US, crude oil produced in 32 states and offshore. However just five states accounted for about 72% of the total production in 2022. These states are Texas, New Mexico, North Dakota, Colorado and Alaska. The chart below crude oil production by state in that year:
The concentration in the US equity market has been running relatively high for the past few years. I have written many times on this topic as can be found here and here and here. Most of the time, I have discussed the concentration using the S&P 500 as the benchmark. However I came across an article recently that showed the market concentration extends to all US stocks and that the level of concentration is reaching historic peaks. For instance, the current concentration levels exceed the dot-com, nifty-fifty, post World War II eras and is heading towards the Great Depression era peak. This is indeed surprising.
I agree with the authors that high concentration does not mean a major decline is coming to the markets but it is wise to pay attention to such facts and make one’s investment decisions accordingly.
