It has been an up-and-down year for the stock market, and despite their usual slow-and-steady style, the same has been true for utility stocks. Utilities were beaten down in anticipation of a rate hike from Janet Yellen and the Fed. After peaking near $50 in late January, the Utilities Select Sector SPDR ETF (XLU) sank to almost $40 by late June. Such a correlation is logical, of course — investors hungry for yield are far from satiated by 10-year Treasuries.
The yield barely tops 2% right now … less than the 2.2% dividend yield of the overall S&P 500! Meanwhile, utilities are known for their extra-sweet payouts. Put another way, the low-yield environment could be here to stay for a bit — and that bodes well for utility stocks. The proof is in the pudding, too. American Water Works (AWK) and Atmos Energy (ATO) have each gained about 8% over the last month, Aqua America (WTR) and Consolidated Edison (ED) have each improved by 7%, while Public Service Enterprise Group (PEG) has posted 6% gains — also nothing to sneeze at.
Source: InvestorPlace
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