Utilities stocks offer some of the most stable and reliable investment opportunities on the market. But government regulation may limit revenue and growth potential.<\/p>
Utilities stocks belong to companies within the utilities sector of the stock market. According to the Global Industry Classification Standard, there are 11 stock market sectors, each defined by a specific industry or type of business. Stock sectors help investors gauge or invest in select pieces of the market.<\/p>
The utilities sector is comprised of companies responsible for basic public services and amenities, including water, gas and electricity. As a result of the public-facing nature of the sector, it\u2019s one of the most heavily regulated, contributing to stable dividends and decreased volatility.<\/p>
Companies within the utilities sector can be publicly or privately owned and break down into the following subindustries:<\/p>
While it\u2019s not possible to directly invest in a stock sector, you can invest in what the sector tracks by purchasing stocks and exchange-traded funds (ETFs)<\/a>.<\/p> Individual stocks let investors target the specific companies they want to back. Stocks can offer high-yield returns, but tend to be more volatile than ETFs.<\/p> ETFs track the entire sector and offer more comprehensive portfolio exposure. But they come with expense ratios \u2014 typically in the 0.03% to 2.5% range.<\/p> To purchase stocks or ETFs, you\u2019ll need a brokerage account. Here\u2019s a quick breakdown of the investment process:<\/p> The list below shows some of the utilities stocks Canadian investors can buy into on either Canadian or US exchanges. If you\u2019re interested in a specific company, take some time to carefully research it \u2014 including its history and financials \u2014 before you buy in.<\/p> You can invest in utilities ETFs from Canada, but if you\u2019re looking for more options, you can also explore ETFs that trade on stock exchanges in other countries like the NYSE<\/a> in the US. There are several Canadian-based brokerages that offer access to international exchanges on which utilities ETFs trade including Interactive Brokers<\/a> and Questrade<\/a>.<\/p> Major utilities-tracking ETFs include:<\/p> The graph below tracks the Utilities Select Sector SPDR Fund ETF (XLU) in the US. Tracking ETF performance is one way to gauge how a sector is performing.<\/p> One of the major draws to the utilities sector is stability. Companies in this sector typically pay steady dividends investors can rely on. The utilities sector is one of the least volatile on the market and is especially well-positioned to weather recession. Gas<\/a>, water and electric companies tend to do well during economic downturn, so stocks in this sector are a prudent choice for investors executing a long-term buy and hold strategy.<\/p> Due to the government regulations that hold significant sway over this sector, it\u2019s difficult for utilities providers to increase their revenue through raised rates. And due to the sizable infrastructure required to operate, utilities providers are often forced to carry a lot of debt, making them especially vulnerable to interest rate fluctuations.<\/p> Profits from investing in the utilities sector can act as a reliable source of income, but investors seeking opportunities with greater growth potential would do better to explore other sectors, like technology stocks.<\/p> In order to purchase stocks or ETFs, you\u2019ll need a brokerage account. Compare your potions using the table below to find the right fit.<\/p>What stocks are in the utilities sector?<\/h4>
What ETFs track the utilities sector?<\/h4>
How is the utilities sector performing?<\/h3>
Why invest in the utilities sector?<\/h3>
What unique risks does the utilities sector face?<\/h4>
Compare stock trading platforms<\/h3>