Best Way to Invest in Electric Utility Stocks to Cover your Bills

What is the best way to invest in electric utility stocks to cover your electric bills? Can you believe the average energy bill is about $2,100 a year?  That is $175 a month.  That is a lot of money to spend on electricity and gas ever year to power your lights, HVAC, a computer, and your other toys. We want our dividends to pay for our electric bill.  Since we like best of breed utility stocks, we want the best electric utility dividend stocks.  We can choice from Consolidated Edison (ED), Duke Energy (DUK), or Southern Company (SO) and get around a 3.5% dividend yield.

https://www.energystar.gov/products/where_does_my_money_go

Best Way to Invest in Electric Utility Stocks
Best Way to Invest in Electric Utility Stocks

Capital Needed

This is the easy part.  We need $2,100 per year.  Take $2,100 and divide by 3.5% dividend yield.  This comes out to needing $60,000 in capital to receive $2,100 a year in dividends.  Is investing $60,000 the best way to pay for your dividend bill?  The answer is no. Follow our journey below to pay our electric bills.

Below, we will use 10-year life span for ROI for saving money.


Lighting

Lighting is 12% of our electric bill, or $252 a year.  Time to replace those incandescent lights and fluorescent light bulbs.  They are both obsolete.  LED lightbulbs are no longer experimental or brand-new technology.  They can save 50% over fluorescent bulbs and 75% over incandescent light bulbs.  The LED bulbs can be bought for $10 or less a piece, which is still expensive, but you can often find the on sale.  We buy 30 LED bulbs for $300 and save 50% on our light bill, or $126 a year.

With a 10-year investment period, that is a savings of $1,260 in reduced electric bills.  That is like earning 32% dividend yield over the original $300 investment.  That is a huge savings. As a bonus, we also do not have to buy replacement light bulbs as often and they produce less heat, saving us even more money.

Electronics

21% of our power usage is about $441 a year for electronics.  TV’s and computer monitors can use a lot of power and produce a bunch of heat.  Next time you need to replace them, consider buying EnergyStar products.  Replacing and buying these with a 40% power savings will save $176 a year.  Replacing some of these items can cost a bunch of money.

Let’s assume buying EnergyStar products instead of the regular items will cost an addition $500.  Over a 10-year period, that is like earning a 25% dividend yield.

Appliance

Appliances cost $252 a year to power.  If some of them are older, they can cost a lot more. Can we save some money with these?

Refrigerator

When I bought my house, my refrigerator was old and not well taken care of.  We replace it with a new EnergyStar model for about $1,200.  After replacing it, it appeared that our electricity bill went down $20 per month, or $240 a year.  Assuming the refrigerator last 10 years, this will save $2,400.  This comes out to a dividend yield of 10%.  That is still better than a lot of dividend stocks.

Dryer

We bought an indoor clothes rack.  Instead of drying clothes in the dryer, we hang them up to air dry.  The rack cost maybe $40 or less, I cannot remember.  It is estimated that it cost about $0.50 to run the dryer 1 time.  If we hang up clothes once per week, that is $26 a year.  Over 10 years, that will save $260, or earn a 55% dividend yield.  Now we are talking.

As a bonus, I believe my clothes last longer, because the dryer is damaging to clothes.  And it saves me time, because I was going to hang up the clothes anyways, so I get to skip the dryer step.

http://homeguides.sfgate.com/average-cost-hour-run-dryer-68320.html

Heating and Cooling

Heating and cooling cost a lot of money, around cost a lot of money, around $882 a year.  There are several ways to reduce our cost without reducing our comfort.

We bought a programmable thermostat for about $100.  There are a lot that cost way less than this.  By reducing the heating and cooling while we are at work or sleeping, we can save 10% of the cost.  That is $82 a year.  Over 10 years, we will save $820 or earn an equivalent 72% dividend yield.  Not bad.

You know those child safety outlet plugs to put into outlets.  They reducing a place where air can escape into the outlet and into the wall past insulation.  You can buy enough for the house for $20.  Assume they save us 1% per year, and we are saving $8 a year, or $82 in 10 years.  This comes to a 31% dividend yield.

For the winter, we bought a nice electric fireplace for the living room for $150.  By heating the living room extra, we can reduce the temperature in the whole house and saved a lot in heating.  We believe this saved us $200 this past winter.  Over 10 years, this saves $2,000 or a 123% dividend yield.  That is a lot.

There are dozens of ways to save money in heating and cooling.  A lot of them have great ROI (returns of investments)

Overall, let’s assume we can reduce our heating and cooling bill by 30% for a $1,000 investment. Some of the items can become more expensive after we do all the easy ones.

Combine

Table of the items above:

Item Cost Yearly Savings
Lights $300 $126
Electronics $500 $176
Refrigerator $1,200 $240
Dryer $40 $26
Thermostat $100 $82
Outlet Plugs $20 $8
Electric Fireplace $150 $200
Others $1,200 $192
Total $3,510 $1,050

 

Note: There is a bunch of assumption in these numbers.  Some of them are for replacing items and some are for incremental cost of buying an energy efficient item instead.  Depending on your home, a lot of these numbers could be better or worse.  This is from our research and experience.

Best Way to Invest in Electric Utility Stocks

The best way to invest in electric utility stocks is to reduce your energy cost yourselves.  For a $3,510 investment in your home, you can get the same value in buying $30,000 in utility dividend stocks.  Then, we only need to invest $30,000 in utility stocks to cover our reduced electric and gas bill.

What is your best way to invest in electric utility stocks? Do you try to reduce your bills to reduce your bills for financial freedom? Please feel free to share in the comment section below.

 

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