Utility stocks may not always make most exciting investments, but during a questionable market, this industry can be a great choice for investors seeking a more defensive approach. When the market goes south, investors flock to the safest industries. That is, the industries that are less impacted by a weak economy. The stocks of most utility companies pay higher dividends than most other stocks. As with the consumer staples and healthcare sectors, utility stocks also provide diversification against an investor’s holdings in other more cyclical sectors (i.e. energy, materials). During slow economic periods or a recession, electricity and water are in constant need, thus providing a steady stream of earnings for utility companies. The sector, as measured by the Utilities Select Sector SPDR® (XLU) is up 10.74% for the year. This is primarily due to positive earnings and weaker than expected economic growth. Another critical element that has made utilities a strong performer in 2016 has been that nearly every U.S. utility company is not impacted by the rising dollar.
By considering these utility stocks as part of a diversified portfolio, investors are potentially able to shield themselves from the brunt of a future market decline and collect a steady dividend income. Below are our five highest ranking utility stocks for dividend investors. Ourranking system examines five key criteria in selecting the best candidates in each sector including dividend yield, dividend growth, financial strength, beta, and relative valuation (P/E, P/S, P/B, or P/FFO). Our Top 100 Dividend Stocks list includes several utility stocks with high dividends. These are the favored five: Dominion Resources, Inc. (D), Southern Company (SO), CMS Energy Corporation (CMS), Consolidated Edison, Inc. (ED) and Duke Energy Corp (DUK).
Source: ValueWalk
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Happy to own three of the utilities mentioned. D, SO and ED have been with me since I started on a dividend growth investing path back in 2007. Thanks for sharing.