Time to play defence with your portfolio? Check out these 10 dividend-paying utilities stocks

Time to play defence with your portfolio? Check out these 10 dividend-paying utilities stocks

What are we looking for?

U.S.-listed utilities stocks to add some defence to our portfolios.

The Utilities Select Sector SPDR Fund (XLU-NYSE Arca) is up 6.4 per cent over the past six months, which is positive, but lagging behind all other S&P 500 sectors. However, with the CBOE Volatility Index, or VIX, jumping more than 55 per cent on Wednesday amid the U.S. earning season, it might not be a bad time to start thinking about defending your portfolio with some dividend-paying utilities stocks.

The screen

We will be using Trading Central Strategy Builder to search for U.S.-listed utilities stocks poised to outperform the broad market in case of a market correction.

Story continues below advertisement

We begin by setting a minimum market capitalization threshold of US$10-billion in order to screen for well established large-cap stocks, which tend to have less risk and volatility than small caps. Next, we will select only stocks with price-to-earnings ratios at or below the P/E of the S&P 500 index, which is at 30. We are also interested in companies that have a dividend yield better than the average of the S&P 500 (about 1.6 per cent), in order to generate cash flow if North American indexes start to turn bearish.

We will screen for companies that have a positive average dividend growth rate over the past five years, which indicates a stable dividend. Finally, we want companies with the lowest possible debt-to-equity ratio, which compares the level of debt with the amount of shareholder equity. The higher the ratio, the more leveraged the company is, which could indicate a higher market risk.

We have also included year-to-date and one-year price return for reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener is available through leading retail brokers in Canada and worldwide.

What we found

Topping our list is Algonquin Power & Utilities Corp., a North American renewable energy and regulated utilities company based in Oakville, Ont., and listed on Canadian and U.S. stock exchanges. The company has the highest five-year average dividend growth rate on our list, at 9.4 per cent, and the second-lowest debt-to-equity ratio at 0.9. The stock is also the best performer on our list with a year-to-date performance of 2.8 per cent and a one-year performance of 11.2 per cent.

Chicago-based Exelon Corp.’s U.S. power generation portfolio includes a mix of low-carbon resources, including solar, wind, nuclear and hydropower facilities. The company has the largest market cap on our list at US$40-billion, and a dividend yield of 3.7 per cent.

The utility company with the highest yield on our list – 4.3 per cent – is Consolidated Edison Inc., a holding company whose business segments include Con Edison of New York, an electric, gas and steam utility; Orange & Rockland Utilities, an electric and gas utility; Con Edison Clean Energy Businesses Inc., and Con Edison Transmission Inc.

Story continues below advertisement

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

U.S.-listed utilities stocks to add some defence to our portfolios

Rank Company Ticker Mkt. Cap. (US$ Bil.) Div. Yld. (%) 5Y Div. Grth. Rate (%) Debt/Eq. P/E YTD Perf. (%) 1Y Perf. (%) Recent Price (US$)
1 Algonquin Power & Utilities AQN-N 10 $3.70 9.4 0.90 20.6 2.8 11.2 21.71
2 Public Service Enterprise PEG-N 29 $3.50 4.4 1.10 14.9 -3.3 -6.2 57.54
3 WEC Energy Group Inc. WEC-N 29 $3.00 9.3 1.2 23.8 -1.3 -8 90.86
4 Atmos Energy Corp. ATO-N 11 $2.80 8 0.7 18.6 -4.8 -21.9 91.29
5 Exelon Corp. EXC-Q 40 $3.70 4 1.2 16.9 -2.8 -14.2 42.52
6 Sempra Energy SRE-N 35 $3.50 7.9 1.3 18.5 -5.9 -24.4 122.84
7 Evergy Inc. EVRG-N 12.00 $4.10 7 1.2 18.9 -5 -27 54.14
8 Consolidated Edison Inc. ED-N 24.00 $4.30 3.1 1.3 17.7 -1 -24.2 71.32
9 Alliant Energy Corp. LNT-Q 12.20 $3.30 6.2 1.2 18.3 -4.9 -17.1 49.45
10 Ameren Corp AEE-N 18.60 $2.70 3.6 1.3 22 -3.8 -7.3 75.57

Source: Trading Central

Gary Christie is head of North American research at Trading Central in Ottawa.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Published at Thu, 28 Jan 2021 22:56:59 +0000

What do you think?

Written by Riel Roussopoulos


Leave a Reply

Your email address will not be published. Required fields are marked *



Tiny home used for takeout offers quality food for anyone in downtown Kitchener | CBC News

Anger as trading in GameStop shares is restricted