The Utility sector under-performed the market last year when growth-oriented stocks were in vogue. This year utility stocks could perform better for a variety of reasons including the projected economic recovery, investors’ interest towards value stocks, etc. Utilities are generally preferred by income-oriented investors since they offer stable growth and high dividend yields. In the they current market conditions, they are even more attractive as they are cheap and can offer shelter from a potential downturn in overall markets. Continued move towards green energy and also upcoming infrastructure investment announcements from the Biden administration could also aid the sector.
A recent Reuters article discussed about utility sectors. From the article:
While utilities still sharply lag gains for the year compared with many cyclical sectors, including energy, they are also considered inexpensive at this point by some investors.
After a weak performance in 2020, utilities “are just really, really cheap at the moment,” Hurst said. “And that is an attractive place to be when you’re in a market that’s very much earnings driven.”
The utilities sector is trading at 18.3 times forward earnings compared with a price-to-earnings ratio of 22.1 for the S&P 500 index and 26 for technology, according to Refinitiv’s data.
David Bianco, Americas chief investment officer for DWS, which has an overweight rating on utilities, said interest rates are still low, but utilities offer inflation protection because they would be able to raise their prices.
As of Friday, the S&P 500 utilities sector had a dividend yield of 3.3%, the second-highest among S&P sectors after consumer staples, and well above the 1.5% yield for the S&P 500, according to data from S&P Dow Jones Indices.
Benchmark 10-year note yields were at 1.660% on Friday after reaching a one-year high of 1.754% the week before.
“Utilities is our most preferred bond substitute,” said Bianco.
Source: Wall Street Week Ahead: Investors look to utilities to weather any market rout, Reuters
The following are ten utility stocks with their current dividend yields. Investors looking to gain exposure to this sector can consider these stocks for further research and analysis:
1.Company: Duke Energy Corporation (DUK)
Current Dividend Yield: 4.03%
2.Company: NextEra Energy Inc (NEE)
Current Dividend Yield: 2.08%
3.Company: Dominion Resources, Inc. (D)
Current Dividend Yield: 3.33%
4.Company: Southern Company (SO)
Current Dividend Yield: 4.15%
5.Company: Exelon Corporation (EXC)
Current Dividend Yield: 3.51%
6.Company: American Electric Power Co. (AEP)
Current Dividend Yield: 3.48%
7.Company: Consolidated Edison (ED)
Current Dividend Yield: 4.16%
8.Company: PPL Corporation (PPL)
Current Dividend Yield: 5.67%
9.Company: Public Service Enterprise Group Inc. (PEG)
Current Dividend Yield: 3.44%
10.Company: Edison International (EIX)
Current Dividend Yield: 4.37%
Disclosure: Long NEE
