The utilities sector is related to the energy field. It is mostly composed or integrated by companies offering public services.
Within the different existing sectors in the economy, the utilities sector refers to those companies that dedicate their economic activity to the provision of public services.
The presence on the stock exchanges of these companies and their corresponding listing supposes the existence of a stock market sector by itself and with specific characteristics. Within this group, those companies offering energy resources such as gas, water and electricity are prominent.
Also included in the utilities sector are corporations dedicated to the construction and maintenance of transport routes (motorways, maritime canals, transport, etc). In other words, we would talk about essential goods and services.
In day-to-day economics, the companies that make up the utilities sector are also known as public service companies.
Investment in securities of the utilities sector
This sector is in itself a set of investment values of great predominance among investors globally.
These companies are largely listed and have a large size and territorial expansion, so they have transferable values in the stock markets.
In that sense, it is one of the most stable and attractive sets of equities from an investor’s point of view.
It should be noted, however, that the large amount of resources and infrastructure required by these companies means that they incur significant levels of debt when financing themselves. This aspect is taken into account when carrying out investments in this sector.
Main financial features of the utilities sector
Taking into account investment nuances, utilities have a series of financial characteristics to highlight:
- little volatility: As they are included in defensive consumption, utilities are largely consumed regardless of their price level (even if their price rises, people will continue to consume water and electricity).
- stable companies: In most cases, values based on utilities are basic in every investment portfolio and constant over long periods of time.
- Moderate return: Profitability levels in this sector are moderate, except on rare occasions such as natural disasters or periods of armed conflict or energy shortages.
- wide offer: In the stock markets there is a wide range of possibilities in terms of public service companies. In other words, a great portfolio diversification is possible from the point of view of the investor interested in utilities.
- Long-term approach: Due to the conditions mentioned above, investment in this type of asset is aimed at investors focused on the long term and stability.