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Business & Money

A new survey produces some surprising responses about investor attitudes.
Fortnightly Magazine - July 15 2003

A new survey produces some surprising responses about investor attitudes.

As government agencies and industry experts report that the U.S. electric and gas infrastructure require significant enhancement and expansion, the electric and gas industries will need to turn to the private investor for massive new funding. A new survey from Deloitte and Touche (Deloitte & Touche National Survey of Individual Utility Investors) identifies both the demographics of the utility investor as well as the elements important to the investor when making the investment decision. We believe that this information will be valuable for regulators, who once again will need to look at the capital attraction standard in their utility ratemaking duties.

Typical Shareholder

The survey identified 501 individuals, or about 8 percent of the public, that owned electric or gas utility stock. Of these respondents, 61 percent were employed-close to the general population figure for employment of about 65 percent. Our respondent was more likely to be retired (26 percent) than the percentage of retirees in the general population (18 percent). The typical shareholder also is more likely to be male (61 percent of respondents), than female, given about a 50 percent balance in the general survey base. The demographics also show that utility stocks are owned by people of all age brackets and a broad range of incomes.

The typical utility stockholder also has had some college education, and 85 percent of utility stock owners are registered voters. Despite the "widows and orphans" theory of who owns utility stock, only 8 percent of these stock owners are widowed.

Buying and Selling

In response to the question, "What enticed you to buy the utility stock?" the survey shows that 22 percent of these shareholders bought stock that was recommended (13 percent by professional advisers and 9 percent by friends and family), and they bought the stock of their local gas or electric company (45 percent). Other reasons for acquiring stock were dividend payments (16 percent), reputation (8 percent), and inheritance (8 percent). In 8 percent of cases the respondent or spouse worked for the company in which they owned stock.

An additional set of detail questions asked respondents to rank the importance of various reasons for buying or holding utility stock. The reasons included "payment of regular dividend," "excellent management," "high population growth service territory," and "possible quick price appreciation."

When asked "What would entice you to sell the utility stock?" respondents listed "price drop" (21 percent) or "price increase" (15 percent) and the need for "money for other things" (18 percent) as top reasons. About 11 percent of respondents reported that they would not sell their stock.

Financial Information

The annual report is still delivered in paper format to 82 percent of utility shareholders, most of whom "read or glance" (77 percent) at it. An overwhelming majority (78 percent) find the information "useful." When asked which sections of the annual report are usually read, the financial statements (54 percent) and summary tables and charts (51 percent) significantly outrank the "president's letter" (30 percent), "management's discussion and analysis" (27 percent), and the