What type of shareholders would buy high dividend electric utility stocks based upon the clientele effect? Explain your answer.
With low-demand elasticity & reliable revenue streams, utility companies are able to afford paying consistent & relatively high dividends to shareholders. Therefore, many utility stocks are treated almost like bonds by income investors who rely on their holdings for earnings. For example, retired individuals or conservative investors. Growth investors tend to avoid these stocks as utility companies often have very limited prospects for good growth. Value investors, however, do not eschew utility stocks.
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