How to Use Utilities Stocks to Pump Up Your Portfolio
September 07, 2010 at 06:00 AM EDT
There was a time when the words "widows and orphans" pretty much defined utilities stocks. As well-regulated monopolies whose products were in constant and increasing demand, they provided a steady stream of income with a level of safety adequate for even the most conservative portfolios. Because of more competition, looser rate regulation, and slower growth, utility stocks aren't quite the safe haven they once were. But with interest rates at all-time lows and continuing economic turmoil, they still have something to offer most investors. Of course, the public utilities field today is considerably less broad and diverse than when your grandmother went looking for her retirement stocks. Following the dismantling of Ma Bell (the original AT&T), which began in 1974, regulated phone utilities gradually disappeared in all but a few rural areas, leading to today's highly competitive tangle of publicly traded telephone companies. Similarly, most of the smaller public water companies have been snapped up by a few big players - like American Water Works Co. Inc. (NYSE: AWK ) - who run them as state-regulated subsidiaries. That makes energy companies the most viable options for utilities stocks. And recent numbers indicate a turnaround is brewing in that sector.