why do utility stocks go down when interest rates go up?

Answer 1

They depend very heavily on borrowing money to build new power plants, repair damaged equipment, paying normal operating costs until they can convince the govt regulators to allow them to raise rates, etc. As interest rates go up, their expenses go up and profits go down. Less profits, stock prices fall.

Answer 2

Simply speaking....when interest rates go up,they add to utility companiy'sinterest costs because utilities tend to be debt heavy and capital intensive. In any situation where interest rates are inversely related to the prices....it has to be the capital related. Try looking it here: stock-market-basics.superiorinvestor.net/utility-stocks/utility-stocks.html

Answer 3

Many stocks go down when interest rates go up because investing in things other than stocks (like bonds, which are tied to interest rates) will bear a greater rate of return on your investment.

Answer 4

Utility stocks are yield vehicles, like bonds, meaning they trade on the basis of their yield (in this case, the dividend payment). The price of yield vehicles trade inversely with interest rates. So if rates go up, prices of yeild vehicles such as utility stocks go down and as rates go down, prices go up.

Answer 5

The price of the stock may go down, but wouldn t the dividend yield increase as most top utilities will not reduce or suspend their dividend?