Risks in electric utilities hint potential stock gains

Recent trouble in the electric utility industry - mostly centered on nuclear power - makes their stocks and bonds riskier investments today than in the past. That contributes to the financial woes of the industry.

With financial problems, utility dividends are no longer the ''sure thing'' they once were. But even today's problem utilities present tempting investment opportunities, offering high yields on stocks and bonds. Risk is higher - but is still not as high as an investment in many of the new high-tech companies on the market.

One way to minimize risk, recommended by analyst Gerald D. Morgan of Prudential-Bache securities, is to buy only preferred utility stock. With preferred stock, the company gives your dividend highest priority, and the yield is not much below the yield on common stock.

Two utilities that have nuclear building programs in progress, Consumers Power Company of Michigan and Long Island Lighting, currently offer 19 percent yields on common stock and 16 percent on preferred. Because 100 percent of the dividend comes via the return on capital, Mr. Morgan says, for tax purposes an investor in a high (50 percent) tax bracket can actually enjoy a yield of 38 percent on common stock and 32 percent on preferred.

''And there is so much more safety with preferred stock,'' Mr. Morgan adds.

One can also invest in utilities via mutual funds that hold a diversity of utility stocks. This, too, decreases the risk. A mutual fund can also translate the utility dividends, which are taxable, into shares of the fund and thus decrease the tax burden on investors.

It should be remembered that only a handful of the 200 investor-owned utility companies today are experiencing difficulty. And even that handful still serves a vital need. Once burdensome construction programs are completed or abandoned, the companies' cash situation should get better and better.