A review of total shareholder returns shows how growth and merger strategies drove performance last year.
Dean C. Maschoff, managing director, Thomas F. Read, senior consultant, and Jason D’Souza, staff consultant, are with Navigant Consulting. Contact Maschoff at 312-583-5719 or firstname.lastname@example.org, Read at 202-481-8404 or email@example.com, and D’Souza at 647-288-5207 or jd’firstname.lastname@example.org.
“I would rather be certain of a good result than hopeful of a great one.” —Warren Buffett
“Widows and orphans” is a term that has been used to describe typical investors in electric utility stocks. The utility companies, however, prefer to describe their appeal to investors as “long-term investments.” Accordingly, rather than focus on one-year returns, many utilities emphasize their shareholder performance over the long run—typically a three- or five-year period.
To better understand the performance of the electric utility sector from both a short-term and long-term perspective, we examined the total shareholder return (TSR)—dividends plus change in stock price—of 58 electric companies1 for 2005 and for three- and five-year periods.2
We grouped these companies into four categories to better understand the impact of alternative strategies on investor performance:3