Roger S. Conrad

The highest-yielding stock in the Dow Jones Utility Average looks like a good buy.

Two names on our Endangered Dividends List cut their payouts.

Like a moth to a flame, income-seeking investors often gravitate toward the biggest yields; all too many end up getting burned.

The Dow Jones Utility Average hasn’t revisited its Feb. 9 low thus far. But the index is still down almost 15 percent from the all-time high reached in mid-November. Weakness in income-oriented equity groups reflects the pullback in the overall market and fears of rising interest rates. However, at these levels, very few high-quality names in our Utility Report Card remain at unsustainably high valuations and only six of our Model Portfolio holdings trade above our value-based buy targets—a stark contract to only a few months ago. Fourth-quarter results and earnings guidance also underscore that tax reform will provide more of a longer-term tailwind for the utility sector than a near-term headwind. Developments on the regulatory front have also been positive, with Duke Energy Corp (NYSE: DUK) settling its rate amicably and the Texas Public Utility Commission finally approving Sempra Energy’s (NYSE: SRE) takeover of Oncor Electric Delivery. By and large, utilities and the other essential-service companies in our coverage universe reported solid earnings and issued encouraging guidance. Bottom Line: The stocks will only fall so far as weakness in the market and interest rate fears pull them. Although the recent pullback has weighed on our overall returns, investors who followed our lead and took partial profits over the summer should have plenty of dry powder at their disposal.

The pullback in utility stocks has weighed on our overall returns, but this retrenchment means that all but a small handful of our Portfolio holdings trade below our buy targets. Investors who followed our lead and took partial profits over the summer should have plenty of dry powder.

All but a small handful of the companies tracked in our Utility Report Card have announced fourth-quarter results.

More than two-thirds of the companies tracked in our Utility Report Card have announced quarterly results and guidance. We update our ratings and comments on last week's reporters.

Sweet yields can bring sour consequences down the line in an unforgiving market.

Twenty-six companies covered in our Utility Report Card announced quarterly results this week, including two Portfolio Holdings.