Utilities are acting once more like the new mo-mo stocks. Look what just set a post-financial crisis high today, closing on its high and thus moving up as the market rallied into the close:
It's a small northwestern utility with a P/E that's "cheap"- under 17 LOL. But the payout is 4.4% and people want that good stuff. Meanwhile P/E's on techs are shrinking and P/E's on a growing number of energy companies are less than 10X TTM.
One factor that actually makes sense in this rush for seemingly secure dividends w/o regard for growth is the tax treatment of foreign earnings. The foreign earnings of all multi-nationals is not able to be paid out to shareholders as dividends until they come back to the U.S. and get taxed. Thus a dollar of domestic earnings are worth somewhat more than a dollar of foreign earnings. That issue notwithstanding, the fact is that utility earnings are not necessarily predictable. Therefore their dividends are not necessarily secure either. I have a massively overweight position in utilities in my IRAs. Avista is one of them. VVC, Vectren is another. The charts are in break-out positions and unlike the new premature faves, the homebuilders, they actually have investment merits in the here and now. The homebuilders will have their day in the sun, but I think they are ahead of themselves. As was the case with gold and silver in 2009-11, sound domestic electric and natural gas utilities look as though they have more room to run on the upside as investors are increasingly reaching for income. Con Ed is at $62. I think $75 is realistic as the months roll by. Unfortunately Cramer feels the same way, but I've been saying so for awhile. He does, after all, get some mo-mo stuff right now and then...