The Utility Sector is primarily made up of three segments. Each offers a moat, in respect to consumer necessity. Human society is very dependent on Energy, Natural Gas, and Clean Water - Waste Water Treatment. My focus, starting 2019, is Electricity. Demand and use is spiking, and the narrative is quite clear. Electrification is seen in a lot of personal devices, retail, and even transportation.
Everyplace I go, I see more electrification. It is easily the most useful and storeable form of energy. Even a simple trip to the gym, I see a log entry book displaced by a scanner and computer. Members are listening to their own music, despite the gyms radio, using their cell phone and BlueTooth Headphones. These little things in the hands of every person adds up to a significant demand. However, that's scratching the surface of growth.
As the narrative continues, I think about how Retailers' have displaced people in several aspects of operation. Not just computers... Robots are now being used to clean floors at WalMart, load and unload Trucks at some Amazon Distribution Centers. Electrified Machines are even used to monitor Inventory Controls (Yep a Robot can see every item on a pallet passing by)! Probably one of the most annoying, longest implemented, and widely used is computers answering customer service phone calls (AI creation). These are the first sightings of displacement that potentially will lead to cheaper prices for consumers and stable profits for Retailers. Both conducive to demand.
The largest disruption Electrification is causing could be Transportation. Electricity could easily displace most of the Oil Industry. 2018 outlined the largest spike in Electric Vehicle Sales (81% according to GreenTechMedia). Probably the most convenient aspect in comparison to conventional vehicles is fewer moving mechanised parts, resulting in the simplest drivetrain. They have no fuel pumps, no oil (or oil pumps), spark plugs, timing, wiring; all gone. It's a Mechanic's NIGHTMARE but a Consumer's DREAM. Cars are slowly fueled while parked at your final destination (Home). Some employers now offer low voltage charging options to their employees too.
But most watched is the prospect of shared personal transportation. Companies like Uber, Waymo, and Lyft have been exploring Electric Autonomous Vehicles. A person could potentially schedule a Pickup for their trip to work, and home. After being dropped off, the vehicle will continue to transport people accordingly. Fully electrified and autonomously driven, these vehicles will revolutionize Transportation and it's affordability. When the battery can no longer complete a trip, it can dock itself like a Robotic Vacuum Cleaner and recharge. Society will have a completely efficient and optimized transportation network that reduces the number of vehicles in use and congestion.
Most important, EV's are cleaner. Once appreciated for reducing Horse Droppings on the roadways, the common Car has become an expensive, dangerous, and disgusting polluter of air, water, and land. Electrification offers a massive change that could greatly displace Oil and pollution. I think the new CEO of GM, noted as the first Woman to take the helm of a Car Manufacturer, sees the future. She has announced a new Electrified Vehicle lineup and reduction in the production of Vehicles with an Internal Combustion Engine.
Farther in the Horizon, Electrification will drastically alter the Commercial Transportation Industry. Tesla is making a long-range Semi with Engines the grossly outperform Diesels. Waymo and Daimler have been running Diesel Powered Autonomous Trucks for roughly three years. These Trucks offer the same advantages seen in Cars. There are no Oil Changes, Transmissions, and fewer moving parts. Uber has developed their Freight App, allowing Shippers and Consignees to schedule the moving of Goods. I think everybody working in Transportation, that is mindful of Technology, is concerned about a major shift in U.S. Logistics. It's coming soon, in my opinion. It's going to disrupt Oil, Maintenance, and Driving. Electrification will save money, make the world cleaner, and make Transporation much more efficient.
All of these shifts increase demand for producing and distributing electricity. I believe we should always have hedge-bets in life. Being a Transportation worker, and likely soon to be heavily affected, my hedge is on Generation and Distribution.
For the past few days, I've been doing a lot of studying. Here is the layout of my favorite Electricity producers in the Utility Sector. I currently have a position in Consolidated Edison (ED), Duke (DUK), and Pennsylvania Power and Light (PPL). I have secured a position for my Daughter in Consolidated Edison and National Grid (NGG).
Data provided by Dividend.com, Guru.com, and Nadaq.com
| Symbol | Price | Yield | Growth | Payout | History | Debt | Score |
| ED | $74.45 | 3.98 | 2.70 | 69.5 | 44 | 1.08 | 3 |
| DUK | $83.66 | 4.43 | 2.90 | 78.6 | 12 | 1.20 | 0 |
| PPL | $28.96 | 5.66 | 1.60 | 70.1 | 7 | 1.98 | 2 |
| SO | $47.22 | 5.20 | 3.40 | 80.50 | 17 | 1.99 | 0 |
| D | $68.77 | 4.91 | 7.60 | 80.90 | 10 | 2.18 | 1 |
My assessment is pretty straightforward. I value each of these metrics the same. I tallied one point for each column where the utility was the best. My purchases going forward in 2019 will be fostered by the next Dividend Payout for ED, PPL, and D.
