Monday, October 10, 2011


The Federal Reserve is pledging to keep short-term rates near zero until at least mid-2013, which is good news for companies who rely heavily on borrowed funds, including utilities.  In economic downturns most people still try to maintain lights and heat/air conditioning to their homes and businesses.  So while other companies may see a drastic reduction in sales, this is not often the case for utility providers. 

With some measure of guaranteed cost reductions from lower interest rates and reduced fuel costs, utilities should benefit over the next few years.  Investors should benefit as well, since utility companies are required by law to pass along a certain percentage of profits to shareholders in the form of dividend payments. 

While no one can predict where the market is headed, I think a good case could be made for utilities coming out as the big winners of the current economic turmoil.

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