In the stock market, you can do well as a conservative, blue chip investor. You don’t need to speculate in gold, oil, or technology to generate good rates of return. As always, the keys to successful stock market investments are good timing and owning a business that’s growing its earnings.
A lot of conservative investors who are saving or are already in retirement buy utility stocks because of the consistency of their earnings growth and their typically higher dividends. Especially for those investors looking for income, the higher dividends associated with utility stocks are attractive.
One utility with a great long-term track record on the stock market is The Southern Company (NYSE/SO), which is based in Atlanta and operates a number of different plants that generate electricity. The company boasts a great track record of increasing earnings and dividend payments to shareholders; and on the stock market, it has performed more like a growing technology stock. The company’s long-term chart is below:
Chart courtesy of www.StockCharts.com
Of course, the real wealth creation from Southern for investors has come from its increasing dividends, which have been going up consistently. The company’s earnings growth is also relatively consistent; as you might have noticed on the stock chart above, the company has performed considerably better than you might expect from a utility stock.
Owning the right business that’s growing its earnings is key to wealth creation on the stock market. I would argue that a utility like Southern Company is worth considering when it’s down in value. The company has an excellent dividend reinvestment plan (DRIP).
During the 1990s, utilities were shunned by … Read More