Utility companies are attractive, too
Investors who tend to be more risk averse but still want to dabble in opportunities for growth should consider Duke Energy (NYSE: DUK ) and Southern Company (NYSE: SO ) .
Duke Energy is primarily known as a utility company. As such, it can sometimes operate like a monopoly in the regions it serves due to a lack of competition. Therefore, Duke investors can rest assured that it is not greatly affected by exterior market conditions. In fact, it only has a beta of .11, indicating that it is not greatly affected by market conditions. Additionally, Duke offers a 4.8% dividend yield.
In addition to providing electricity and gas to its customers, Duke owns and generates around 6,800 megawatts of energy from natural gas, coal, and renewable energy, proving that it diversifies potential risk across various energy generating sources. Reverting to the above image indicates that Duke is an entrenched firm that is positioned for the future.Additionally, because Duke produces some of its own energy, it hedges itself against major price fluctuations in the electricity market. Also, it operates a business unit that builds, owns, and operates transmission lines across the U.S.Again, in so doing, it is able to act like a monopoly, control more external factors than competitors, and generate greater value for investors.
As one of the largest producers of electricity in America,Southern Company will generate investor value long into the future because, similar to Duke, Southern enjoys monopoly-like benefits. Southern boasts a beta of .05 and offers investors a 5% dividend yield. Therefore, income seeking investors should consider holding Southern.
Ultimately, as long as electricity consumption is required to maintain our standard of living, generation is a necessity. Therefore, by diversifying across the top electricity-producing sources or by operating in industries with high barriers to entry, these companies are positioned to reap benefits for investors.