The Glory Of Investing In Utility Stocks


I love me a good utility stock. As far as defensive investments go, they are often about as stable an investment as you can find in this world. There are no sure things in life, but betting on people to continue to use water and electricity is about as close to a guarantee as you can find in common stock investing.

York Water is one of those utility investments that should make an income investor want to sing. It really has the most beautiful dividend history of any company I have ever come across. York Water has been paying uninterrupted dividends since 1816. That is awesome in every single sense of the word. Your great-great-great-great-great grandfather could have come over on the boat from Europe, bought 100 shares of York Water stock, and you, the great-great-great-great-great grandchild would still be collecting the cash payments every ninety days today. Oh, and the dividend has grown three thousand fold since then, so you would literally be a water baron right now.

And imagine the psychological rewards of your York Water ownership stake if you happened to live in the Pennsylvania area where it conducts most of its operations. Every time you visited someone’s house and saw them wash their hands, do a load of wash, or hear the toilet flush, you would know that the money they are literally flushing down the toilet will be showing up in your bank account ninety days later, given that York Water has a distinguished tradition of returning most of its profits to shareholders in the form of cash dividends.

When you consider the things that have happened in the past two hundred years, it becomes awe-inspiring to think about what York Water’s dividend has persevered through. I mean, hell, Texas did not become part of the United States until 1845. York Water had already been paying dividends for thirty years before that.

The company did not miss a dividend payment during the Civil friggin’ War. Our country was splintering in half, Confederates could have been marching into your town, and President Lincoln eventually got assassinated, and yet, the York Water dividend payment still arrived in your mailbox every ninety days. It turns out that even when our fellow countrymen were trying to kill each other, water continued to flow into their houses.

This storyline continued across the twentieth century as well. York Water paid out its dividend during WWI. When the Japanese attacked us at Pearl Harbor, York Water still paid its quarterly dividend. It’s crazy to think that while President Roosevelt was mobilizing the country to stop German advancements, York Water still continued to return cash to shareholders. That tells you something about a company’s business model. It turns out that man’s use of water is a pretty timeless need. As an investor, you can take advantage of that and use a water utility company to provide you with the kind of regular income that will add new meaning to the term “income stream.”

Some people honestly believe that investing is a scam. One big casino. An underworld run by Wall Street gamblers. That is not how I want you to view investing. The stock market is just an auction house for businesses. Some businesses are good, some businesses are mediocre, and some fall somewhere in between. There used to be a business by my house called “The Bird Emporium.” It went under during the 2008-2009 recession. Does that surprise anyone? Meanwhile, the McDonalds by my house always has a booked drive-thru, and if you go there during a lunch hour, you won’t be able to find a seat. During that 12:00-2:30 time frame every day, the cash register literally does not stop ringing.

There is no conspiracy with the stock market. If you want to be a good long-term investor, you want to maximize the number of McDonalds-like investments you can find, and minimize the number of “Bird Emporiums” in your own portfolio. It’s hard to screw up a water or electric company. You pretty much have a captive, permanent customer base. That’s why the Exelon dividend cut was such a big deal. That’s not supposed to happen in water or electric utility world, and it took years of mismanagement for Exelon to get to that point.

I wouldn’t buy too many utility stocks right now, because most of them are trading at ten-year valuation highs because we are all starved for reliable income and there are not a whole lot of options out there that quench that thirst (I’m sorry, I couldn’t resist). But if I already held a water or electric utility in my portfolio, you can be damn sure I’d sit back and collect my dividends, waiting for the next correction to buy more. That’s what long-term owners of stable businesses do. You acquire high-quality assets that will put money into your pockets on a reliable basis, and you take those profits sent to your checking account and make new investments, meet living expenses, fund dreams, and/or donate to charity.

Originally posted 2013-06-08 13:02:19.

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5 thoughts on “The Glory Of Investing In Utility Stocks

  1. Steve Hawkins says:

    There is nothing to disagree with in this article, Tim. Utilities are about 7% of our div portfolios, and I would like to up that a bit, but as you cite, they are too expensive right now. My rule of thumb for utilities is a minimum of 5% current yield. I'm confident we'll see that level in the future, though I'm not sure when. My past ownership of Exelon is still a sore spot. I sold some time ago at a bit of a loss. I don't know what their future holds but I view them as unworthy of being in my portfolio. Thanks for taking the time to write your articles.

  2. bruce says:

    I thoroughly enjoy your articles.

    However, at the risk of sounding particular, I wanted to point out this error, because it seems to be egregious.:

    "The company did not miss a dividend payment during the Civil friggin’ War. Our country was splintering in half, Confederates could have been marching into your town"

    The northern yankees invaded the confederacy, not the other way around. The Confederates fought a defensive war.

    1. Tim McAleenan says:

      Thanks for the comment, Bruce. Here's what I had in mind when I wrote that. In 1902, I know York Water had 10,000 shareholders. I do not know what the figure was in the early 1860s, but I am guessing that York Water probably had 5,000-10,000 shareholders. Since York Water is headquartered in Pennsylvania, I ventured the guess that most of the shareholders would have resided in Pennsylvania (technology being what it was, most stock ownership was highly localized back in the day). When I wrote my comment, I pictured something like the Confederates marching through the Shenandoah Valley to Gettysburg, Pennsylvania. I wasn't trying to be political. I just figured most York Water shareholders were Pennsylvanians, and I had Gettysburg on my mind when I tried to paint the portrait.

  3. I am happy to see you are starting out with your own site Tim.

    I wanted to drop by and say hi to you.

    I had a question regarding the particular sources of your data. I have been interested in learning more about the dividend history of YORW, but unfotunately have not really found much other than the statement it has paid dividends since 1816.

    Could you please refer me to the information showing its distributions went up 3000 fold since 1816? Do you have the historical dividend rates by any chance?

  4. says:

    What is written here is completely absurd. The author, you at least imagine what it is for a person who does not understand this topic to read such…. nonsense.

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