The Dow Jones Utility Average has posted positive returns in 35 Octobers and 38 fourth quarters since 1969. This year, it will try to repeat that with the benchmark 10-year Treasury note yield (TNX) rising to its highest level in seven years.
Powerful DJUA returns in 2009 and 2013 against 70 percent plus increases in the TNX demonstrate dividend-paying stocks can make big money when rates rise. So does the DJUA’s 60 percent return during the previous Federal Reserve tightening cycle in 2004-06, and utilities’ nearly 70 percent since May 1, 2013, when the Fed declared the end of Quantitative Easing.
Rate fears, however, can be a near-term headwind. All too many investors still reflexively sell dividend-paying stocks when worried about rates. And the sheer size of dividend stock ETFs can accelerate action in a hurry.
That’s why, instead of betting on utilities as a sector, I advocate focusing on shares of high quality companies when they take a temporary spill.
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Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
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Warning: Falling Dividends.
Roger's current take and vital statistics on more than 200 essential-services stocks.