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Buy These Utilities Following An Industry Pullback

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March 01, 2012 – Comments (0) | RELATED TICKERS: AEP , ED , AVA

Utility stocks have retraced from the great price gains in 2011. Year to date through February 17, the S&P Utilities Index fell 3.2%, versus an 8.2% gain for the S&P 500. In 2011, this sector index was up 14.8%, versus a flat showing for the 500. There are four sub-industry indices in this sector, with Electric Utilities being the largest at 53.7% of the sector's market value. With only modest improvement expected in the housing and power markets for 2012, the sector's EPS outlook is below average. However, I expect the sector's high dividend yield (recently at 4.2%) to at least be maintained, if not rise slightly, and the electric utility revenues and gas utility gross margins will increase. Investors should focus on highly rated utilities that have pulled back from the 2011 price run up. Here is a starting list of potential stocks worth consideration.

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