The yield for 10-year Treasury bonds is now over 3.1 percent, more than double where it began 2022. And the US Federal Reserve has decisively moved to tighten monetary policy with a 50 basis point increase to its key Fed Funds rate. Yet the Dow Jones Utility Average is still very much in the black year to date. Those facts alone should disabuse anyone of the notion there’s any hard and fast relationship between changes in benchmark interest rates and investment returns for utilities and other dividend paying stocks. Rather, the difference maker when it comes to earnings and share performance is the same as it ever was: The health and growth of underlying businesses. Essential services companies do tend to be big borrowers when they finance infrastructure. So borrowing rates can have a major impact on business performance, which I highlighted in last month’s feature article.
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