Is the AGL Energy Ltd (ASX: AGL) share price a buy as a defensive utility during the coronavirus share market volatility?
I have already pointed to shares like TPG Telecom Ltd (ASX: TPM) and Telstra Corporation Ltd (ASX: TLS) that are likely to see the same (or more) demand from most customers because of the lockdowns across the country.
What about an energy generator and provider like AGL? Utilities are very important for living and enabling staying at home. More people will have their cooling/heating on during the day at home. More people will do cooking at home if they're not eating in restaurants. More people will be using the TV and perhaps gaming consoles to spend some of the time.
Energy demand from customers is likely to increase. That should be a good thing for AGL.
Therefore that means AGL is defensive and will be fine during this, right?
Is AGL's partially franked dividend yield of 7.1% an obvious play? It looks attractive after a 27% fall since 21 February 2020.
But don't be so fast. A large part of the energy demand is from regular consumers, but large business customers are also big users of energy. If many of those large customers temporarily stop operations then AGL would see a large decline in energy demand from this segment.
AGL is an important part of making sure that our country can keep running during this period. But energy demand may not be as consistent as one may think.
Added to that complexity is the longer-term growth of renewable energy, particularly with installation of solar panels on more homes.
Foolish takeaway
AGL may hold up better than some shares, but I'm not convinced it's as defensive as it seems at first. I think I'd rather go for businesses with stronger long-term growth prospects.
