Utility stocks and energy stocks may be thought of as one and the same. But they are very different. When it comes to utility stocks, these companies typically provide power, light, water, etc. to businesses and consumers.
While many of these companies have a hand in raw materials, the majority of utility stocks aim to provide access instead of raw material. Other types of utility stocks may include sewage services, waste management, and generally things that indirectly keep businesses moving forward.
Utility companies often earn revenue through public service contracts. For the most part, investors looking to buy utility stocks aren’t looking for a quick trade. Many of these companies offer a dividend and can bring long-term income into a portfolio.
Why Utility Stocks?
Finding top utility stocks to buy may be as easy opening up your latest power bill. Whose logo is in the letterhead? Look them up and if they aren’t directly publicly traded, the company may be a subsidiary of one that is. However, utility stocks are greatly influenced by annual cycles. Obviously, energy usage can be higher in summer months in the south for air conditioning but lower in the winter.
On the same note, energy consumption may be higher in the winter for northern areas in comparison to southern. But it may be lower in the summer comparatively speaking. Energy network operators, service providers, retailers, resellers, and even generator companies might fall into the category of utility stocks. One of the most important things to consider when looking for utility stocks to buy: the balance sheet. How well are they capitalized, are they growing, what’s the debt look like, etc?