The Southern Company (SO), American Electric Power Company Inc (AEP): Are Utilities Ripe For The Picking?

However, it’s important to remember that there’s a cost to these juicy yields, which comes in the form of extremely modest growth. Since electricity is something consumers still need in economic downturns, investors are not likely to see strong growth in times of economic recovery. After all, there’s only so much energy a household will consume.

The Southern Company (NYSE:SO) grew its adjusted earnings per share by 2.6% over the first half of 2013, and PPL Corporation (NYSE:PPL) posted $818 million in net profit through the first half of the current year, up just slightly from $812 million in the same period one year ago. For American Electric Power Company Inc (NYSE:AEP)’s part, it saw its first-half net income actually drop 6.6%.

Are utilities right for every investor?
In the end, whether an investor should add these utilities to their portfolio depends on their individual situation and investing goals. In my estimation, young investors with a long investing time horizon shouldn’t allocate much of their capital to utilities, due to their extremely slow-growing natures.

On the other hand, investors with a significant need for income (such as those in or near retirement) who are generally more risk-averse, should consider these utility stocks. Southern, American Electric Power Company Inc (NYSE:AEP), and PPL Corporation (NYSE:PPL) have long track records of consistent performance, and give you the added bonus of trading for more advantageous prices than at any time for most of the past year. Therefore, while growth investors should look elsewhere for better opportunities, those investors who need to derive strong income from their investments should continue to own these utilities with confidence.

The article Are Utilities Ripe For The Picking? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Southern Company. 

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