Utility stocks are often seen as stable investments that pay good dividend yields — relatively sleepy stock plays but safe buys. But the reality is that even high-yield dividend stocks can be toxic to your portfolio, and utilities that lose big value in shares don’t make up for any dividends they pay.
Take FirstEnergy (NYSE: FE), an Ohio utility with a 5.9% yield. Dividend investors who thought they were getting high yield and a safe buy have had a rude awakening with FirstEnergy. The stock is off almost 20% year to date after some brutal earnings performances. That’s hardly a safe buy — in the utility sector or otherwise.
To help you avoid high-dividend utility stocks that may lose more than they pay out in quarterly disbursements, here’s my list of six utility stocks to sell now.
Veolia Environnement (VE)
Based in Paris, Veolia Environnement (NYSE: VE) provides water, wastewater, environmental, energy and transportation services. 2010 has been very unkind to this French utility stock, as the stock price has fallen 17.8% since January. Even worse, the stock is down 29.6% over the past 52 weeks, compared to moderate gains by the broader markets. In its last income statement, Veolia reported a quarterly revenue growth of 1.2%. Finally, Veolia is trading just a few dollars above its 52-week low of $23.13. If you haven’t done so already, drop this utility stock.
FirstEnergy (FE)
FirstEnergy is a holding company that owns eight electric utility companies primarily in Pennsylvania, Ohio and New Jersey. The company is based in Akron, Ohio. This utility stock is down 17.9% year-to-date. Shareholders were equally displeased by the company’s last income statement, which showed a 36% drop in earnings from a year earlier.
Exelon (EXC)
Based in Chicago, Exelon (NYSE: EXC) is another electric utility holding company that makes the list. Exelon’s major subsidiaries are Exelon Generation, Commonwealth Edison and PECO Energy. Since January, this utility stock has slid 12.1%, compared to small gains by the broader markets. More depressing for shareholders is the fact that Exelon is down 14.3% over the past 52 weeks. Like the other companies on this list, Exelon’s earnings dropped 32.3% in the last quarter.
Korea Electric Power (KEP)
Korea Electric Power (NYSE: KEP) is an integrated electric company involved with the transmission and distribution of much of Korea’s electricity. KEP owns six subsidiaries, which combine to generate all of the electricity in Korea. Since January, the stock has fallen 9.9% and the utility stock is down 10.6% since last September. The numbers have not been good for KEP in a while, and the company reported a net profit margin of 0.1% during all of 2009. Trading at $13 or so, KEP is only slightly above its 52-week low of $11.15.
Entergy (ETR)
Entergy (NYSE: ETR) is another integrated electric company making the list. Based in New Orleans, Entergy is primarily engaged in electric power production and retail electric distribution. The company owns several power plants and runs a nuclear power generator in the U.S. 2010 has been less than stellar for Entergy, which has watched its stock price slide 5.7% since January. The long-term numbers for this stock are not much better, as Entergy is down 3.4% over the last 52 weeks. While the numbers may not be as bad as other stocks on this list, Entergy is still a utility stock to avoid.
PPL Corp. (PPL)
Another utility holding company on the list, PPL Corp. (NYSE: PPL) generates electricity from power plants in the northwestern and western United States. The electricity generated is then distributed to four million customers in the United Kingdom and Pennsylvania. Over the past nine months, PPL stock has declined 14.8%. Additionally, PPL missed earnings estimates by a nickel last quarter, while posting a 10.1% quarterly revenue growth, year-over-year. If the past is any indication, PPL is a utility stock worth selling, considering the company’s stock is down 13.8% over the past five years.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
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