As The Market Dims, Utilities Burn Bright

Stocks might be overdue for a pullback, but at least one sector looks poised to keep generating heat. An improving U.S. economy and the coldest March in recent memory have the utility sector putting up electrifying returns so far this year. Usually, that would make these stocks a prime source of funds in any generalized selloff, but given their defensive characteristics and high dividends, utilities should maintain their relative outperformance if and when stocks cool off.

As good a year as it’s been for utilities, unlike the Dow or S&P 500, the Dow Jones Utility Average is still about 8% below its all-time closing high. With Dow Utility components like Dominion Resources (NYSE:D), PG&E (NYSE:PCG) and NiSource (NYSE:NI) at or near 52-week highs, it might not be too long before the average takes out that level. If the market does retreat, utilities will of course take a step back too. But it should be a shallower selloff, thanks to their defensive aspects and the hefty dividends providing a downside cushion.

Source: InvestorPlace

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