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Monday, November 5, 2012

Sandy's Aftermath: Not Good for Utility and Telecommunications Stocks

Utility and Telecommunications stocks such as T (ATT) and VZ Verizon have been favorites of dividend and “dividend growth” investors. They have already been trading at high valuations. There is no doubt there will be costly damage to their infrastructure and earning along with the horrible human tragedy associated with Sands. In fact Verizon has aready acknowledged this.

Verizon says Sandy effects could be 'significant'
AP /  November 5, 2012

NEW YORK (AP) — Verizon says the effects of Superstorm Sandy on its fourth-quarter earnings could be ‘‘significant.’’
Verizon Communications Inc., whose downtown Manhattan facilities were flooded and are still without power, said Friday it is working to restore communications services to customers affected by the storm.
The hit to earnings would mean valuations like P/E will become even more lofty (after all the “E” will go down) and may increase the payout ration, also not a great sign.
It seems clear some market participants have already reacted to this possibility.
Here (above) is the chart of XLU the utilities ETF

Here is ATT (T)

And here is Verizon (VZ)