Investing in Utility Shares & Using Dividends to Pay utility bills?

MFW_ASAP

I'm in the process of reducing my utility bills by a combination of conservation (water saving devices; wall, floor and loft insulation; energy efficient white goods and TV, etc) and generation (solar PV panels, rainwater recycling, wood burning boiler stove). The above all have payback periods of less than a decade and we have no plans to move home for +20 years, so it seems a 'no brainer' to make this investment.

Once our utility bills have been reduced, I was wondering if it would be a good plan to buy shares in the various utility companies and use their annual dividends to pay the utility bills?

For example, I worked out that if I held £10k of United Utility shares in an S&S ISA, the annual dividends would completely covermy annual water bill. I could have the dividends automatically pay into a 'Utiltity' account from which the monthly direct debits were paid to the water company. The whole thing would work automatically and I'd never have to think about the bill again.

If the water charges go up, then it often follows that the dividend also goes up, covering the increase in my bill. If not, then I can always increase my holding.

Is anyone else doing this? Is it bonkers?

Any thoughts, criticisms would be appreciated.

CLAPTON

MFW_ASAP wrote: »

I'm in the process of reducing my utility bills by a combination of conservation (water saving devices; wall, floor and loft insulation; energy efficient white goods and TV, etc) and generation (solar PV panels, rainwater recycling, wood burning boiler stove). The above all have payback periods of less than a decade and we have no plans to move home for +20 years, so it seems a 'no brainer' to make this investment.

Once our utility bills have been reduced, I was wondering if it would be a good plan to buy shares in the various utility companies and use their annual dividends to pay the utility bills?

For example, I worked out that if I held £10k of United Utility shares in an S&S ISA, the annual dividends would completely covermy annual water bill. I could have the dividends automatically pay into a 'Utiltity' account from which the monthly direct debits were paid to the water company. The whole thing would work automatically and I'd never have to think about the bill again.

If the water charges go up, then it often follows that the dividend also goes up, covering the increase in my bill. If not, then I can always increase my holding.

Is anyone else doing this? Is it bonkers?

Any thoughts, criticisms would be appreciated.

interesting idea but single shares are very risky : utilities particularly so as they are susceptible to political interference

better to invest in a wider range of equities (ft100 index) or similar if you are willing to risk equities at all.

racing_blue

MFW_ASAP wrote: »

I'm in the process of reducing my utility bills by a combination of conservation (water saving devices; wall, floor and loft insulation; energy efficient white goods and TV, etc) and generation (solar PV panels, rainwater recycling, wood burning boiler stove). The above all have payback periods of less than a decade and we have no plans to move home for +20 years, so it seems a 'no brainer' to make this investment.

Once our utility bills have been reduced, I was wondering if it would be a good plan to buy shares in the various utility companies and use their annual dividends to pay the utility bills?

For example, I worked out that if I held £10k of United Utility shares in an S&S ISA, the annual dividends would completely covermy annual water bill. I could have the dividends automatically pay into a 'Utiltity' account from which the monthly direct debits were paid to the water company. The whole thing would work automatically and I'd never have to think about the bill again.

If the water charges go up, then it often follows that the dividend also goes up, covering the increase in my bill. If not, then I can always increase my holding.

Is anyone else doing this? Is it bonkers?

Any thoughts, criticisms would be appreciated.

I went through this thought process a while back. It "feels" nice but in reality there is a mismatch between the riskiness and purpose of the investment - which is to provide income to meet a specific need.

Take the example of someone who wanted to fund their weekly £50 Tesco Shop and bought £50K of shares in anticipation of a nice stable dividend. And then along come Lidl, Aldi, and something from the fish counter in a quaterly report. Share price halves, dividend cut. The only thing not cut is the weekly grocery bill.

Or... say they bought £20K of BP shares, planning to fund their fortnightly tank of petrol. Fine until suddenly oil starts gushing into the Gulf of Mexico on BP's watch, share price plummets and the dividend is cut...

bowlhead99

I agree that a broader portfolio is better, even if psychologically it would be nice to think that your investment is paying your bills.

The end goal really is to not need to work, and instead be retired, living off a pension income and investments. And a pension is just a return from long term investments or a lifetime of nat ins contributions.

So, you'll end up living off your returns. And while you could try to associate different specific investments with specific expenditures (supermarkets and petrol and water services and energy and trips to the pub and banking products and software etc)... it makes more sense, at least from a risk perspective, to say that your whole portfolio will generate "overall" returns and your expenses, overall, are funded by those returns. You don't need to build up the portfolio one expense type at a time.

For example, through Indian or emerging markets or general global funds in my portfolio I will have exposure to Tata Motors. But I'm not going to hold out to generate enough dividends from that specific source before I get the car serviced. Likewise the rewards from Google and Samsung aren't specifically intended to fund a new smartphone. But overall I'd like my total income to cover my total expenses. That way, I never work again after retirement, but the different expenses are cross-subsidised by different income streams.

To create a 1:1 self-funding relationship is a bit of fun but likely more trouble than it's worth. Sure, you could buy a lot of utility shares to cover the water and energy bills but then your capital is all tied up with an "opportunity cost" when you no longer get the income from the assets to spend on other things.

Bazofts_Revenge

If you want an investment that directly pays your energy bills then look at a renewable energy source that has guaranteed FIT payments. Prices for solar are coming down (and so are the Fit payments for new installations)

I've had solar nearly 2 years and it is doing well so far. The Fit payments go up with RPI or similar and the payments are tax free. Electric bills are well down and with additional income from United utilities, Seven Trent and Centrica shares (big capital losss on paper) I don't worry about my bill from First Utility (one of the cheapest suppliers)

6022tivo

The next government may interfere with the energy cartel we have in the UK. So risky in my opinion.

le_loup

6022tivo wrote: »

The next government may interfere with the energy cartel we have in the UK.

Let's hope so.

planteria

MFW_ASAP wrote: »

...Once our utility bills have been reduced, I was wondering if it would be a good plan to buy shares in the various utility companies and use their annual dividends to pay the utility bills?

For example, I worked out that if I held £10k of United Utility shares in an S&S ISA, the annual dividends would completely covermy annual water bill. I could have the dividends automatically pay into a 'Utiltity' account from which the monthly direct debits were paid to the water company. The whole thing would work automatically and I'd never have to think about the bill again...

it's a really nice idea, and i like your thinking. good advice from bowlhead and Bazofts. your other investments would give your idea some context, of course. i do share the concern of others, but also utilities have, generally, been good consistent dividend payers. and i doubt there will be a lot of change even if Labour lead the next coalition.