Utilities Losing Spark Regulations, Interest Rates May Zap Stocks

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Utility stocks have long been the backbone of conservative portfolios because they're considered safe and pay above-average dividends.

Now, utility stocks are looking less attractive, and analysts say retirees and other risk-averse investors should consider searching elsewhere for yields that could rival the 4.5-percent to 6-percent rates offered by utilities.

"If interest rates move up sharply, that's a real threat to utility stock prices," said Leonard Hyman, analyst at Merrill Lynch & Co.

Utility shareholders also are being hurt by regulatory curbs on rate increases, lackluster earnings and slow dividend growth, stiffer competition, and stock prices …