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Philip van Doorn

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Dec. 1, 2018, 3:19 p.m. EST

Utility stocks have beaten the S&P 500 in two months of turbulence and in the long run

The safest of sectors makes investors lots of money during thick and thin

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By Philip van Doorn, MarketWatch


Everett Collection
People (and film studios) will always need electricity.

The S&P 500 utilities sector has been the best performer during the market decline that began in October. Don’t roll your eyes.

We know it may not be a surprise, as utility companies offer investors a haven in times of turbulence. But what may interest you is how much better this stodgy sector’s performance has been over long periods.

From the end of September, the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +0.51%  has declined 8%, including reinvested dividends, while the S&P 500 utilities sector returned a positive 3.3%. Here’s a chart showing how well the 12 sectors of the S&P 500 Index have fared over various periods:

Total returns
S&P 500 sector Sept. 28 through Nov. 26 2018 3 years 5 years 10 years 15 years 20 years
Utilities 3.3% 6.1% 42% 71% 175% 338% 264%
Consumer Staples 1.3% -2.1% 20% 46% 205% 281% 270%
Real Estate 1.2% 2.9% 20% 63% 302% 268% N/A
Financials -3.8% -3.7% 42% 67% 220% 67% 111%
Health Care -4.8% 11.0% 33% 78% 342% 316% 307%
Materials -7.1% -9.6% 25% 34% 204% 212% 281%
Communications Services -9.5% -8.9% 14% 18% 119% 181% 29%
Industrials -10.3% -6.0% 32% 51% 272% 253% 295%
Consumer Discretionary -12.2% 6.0% 33% 72% 504% 328% 374%
Information Technology -13.0% 4.9% 62% 123% 477% 334% 241%
Energy -14.2% -7.8% 4% -14% 50% 239% 310%
S&P 500 Index -8.0% 1.8% 36% 64% 273% 244% 229%
Dow Jones Industrial Average -6.5% 1.7% 49% 73% 266% 267% 323%
Source: FactSet

The S&P 500 utilities sector has been the best during the post-September market turmoil and has ranked second for 2018 through Nov. 26. But if you look at the longer periods, the total returns exceed those of the entire S&P 500 for all periods except for 10 years.

But that 10-year figure is a bit deceptive. You need to consider what occurred before this 10-year period began. The S&P 500 was down 34% (including reinvested dividends) for two years through Nov. 26, 2008, while the utilities sector suffered a far milder 13% decline.

The 20-year chart shows that, for the most part, the utilities sector has had less “downside capture” than the index:


FactSet
The utilities sector has been an excellent long-term performer.

There’s no question that over the past five years, the information-technology sector, driven by the market-cap-weighted performance of the FAANG companies (Facebook /zigman2/quotes/205064656/composite FB +2.03% , Apple /zigman2/quotes/202934861/composite AAPL +1.27% , Amazon /zigman2/quotes/210331248/composite AMZN +1.49% , Netflix /zigman2/quotes/202353025/composite NFLX +2.38%  and Alphabet /zigman2/quotes/205453964/composite GOOG +0.43% ), has been the place to be. But the FAANG stocks have all fared even worse than the S&P 500 since the end of September, despite the companies’ fast growth.

The 15-year and 20-year returns give evidence to the importance of the utilities sector: People and companies need those services in what is a critical industry protected by regulators. Utilities also reward investors with steady dividend payouts.

Investing in utility stocks

Concentrating on individual stocks can be a risky endeavor. Shares of PG&E Corp. /zigman2/quotes/202583141/composite PCG -1.46% , the owner of Pacific Gas and Electric Co., are down 47% for 2018. Investors have worried that the company may be held liable for the California wildfires. Then again, some investors have looked at the decline as an opportunity.

Regardless of how the PG&E saga plays out, there’s no question that a safer way for investors to gain exposure to the utilities sector is through an exchange traded fund, such as the Utilities Select Sector SPDR ETF /zigman2/quotes/206645117/composite XLU -0.61% , the Vanguard Utilities ETF /zigman2/quotes/201635887/composite VPU -0.65%  or the iShares U.S. Utilities ETF /zigman2/quotes/205743777/composite IDU -0.66%

The sector

Here are all 29 stocks included in the S&P 500 utilities sector, ranked by how well they have performed over the past five years:

Company Ticker Total return - 5 years Total return - 10 years Total return - 15 years Total return - 2018 through Nov. 26 Dividend yield
American Water Works Co. /zigman2/quotes/205092314/composite AWK 146% 506% N/A 3% 1.97%
NiSource Inc /zigman2/quotes/208795963/composite NI 139% 723% 486% 4% 3.02%
NextEra Energy Inc. /zigman2/quotes/200558509/composite NEE 139% 405% 803% 16% 2.51%
CMS Energy Corp. /zigman2/quotes/209852159/composite CMS 124% 633% 842% 11% 2.81%
Ameren Corp. /zigman2/quotes/200090237/composite AEE 124% 211% 216% 18% 2.80%
Evergy Inc. /zigman2/quotes/200697282/composite EVRG 123% 362% 469% 15% 3.19%
Xcel Energy Inc. /zigman2/quotes/200626850/composite XEL 116% 313% 470% 9% 2.97%
DTE Energy Co. /zigman2/quotes/205073403/composite DTE 106% 385% 496% 9% 3.24%
Alliant Energy Corp /zigman2/quotes/201224484/composite LNT 103% 322% 545% 7% 3.03%
WEC Energy Group Inc /zigman2/quotes/207419035/composite WEC 102% 361% 584% 10% 3.13%
Exelon Corp. /zigman2/quotes/205982254/composite EXC 102% 26% 160% 19% 3.05%
Pinnacle West Capital Corp. /zigman2/quotes/202967011/composite PNW 100% 362% 342% 8% 3.33%
Public Service Enterprise Group Inc. /zigman2/quotes/201831904/composite PEG 97% 168% 376% 7% 3.37%
American Electric Power Co. /zigman2/quotes/209801263/composite AEP 92% 280% 411% 7% 3.53%
Eversource Energy /zigman2/quotes/203789081/composite ES 91% 306% 463% 8% 3.02%
Entergy Corp. /zigman2/quotes/208005291/composite ETR 74% 62% 195% 10% 4.24%
Consolidated Edison Inc. /zigman2/quotes/207137172/composite ED 72% 203% 288% -5% 3.66%
NRG Energy Inc. /zigman2/quotes/208308731/composite NRG 59% 91% N/A 38% 0.31%
Duke Energy Corp. /zigman2/quotes/201480230/composite DUK 53% 209% 462% 8% 4.27%
CenterPoint Energy Inc. /zigman2/quotes/206368471/composite CNP 47% 251% 455% 2% 3.99%
Sempra Energy /zigman2/quotes/206074517/composite SRE 46% 239% 520% 7% 3.20%
Southern Co. /zigman2/quotes/208000495/composite SO 42% 104% 215% 0% 5.26%
FirstEnergy Corp. /zigman2/quotes/201870541/composite FE 42% 6% 111% 28% 4.03%
Edison International /zigman2/quotes/206923834/composite EIX 38% 127% 310% -12% 4.48%
PPL Corp. /zigman2/quotes/207772352/composite PPL 37% 61% 207% 4% 5.34%
Dominion Energy Inc /zigman2/quotes/206853976/composite D 36% 204% 341% -5% 4.51%
AES Corp. /zigman2/quotes/209256253/composite AES 26% 145% 112% 48% 3.38%
Scana Corp. 20% 112% 162% 20% 1.06%
PG&E Corp. /zigman2/quotes/202583141/composite PCG -28% -6% 59% -44% 0.00%
Source: FactSet

You can click on the tickers for more about each company, including news, profiles, charts, ratings and financials.

Don’t miss: These stocks are in bear territory, but analysts expect them to roar back

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$ 37.50
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Volume: 1.99M
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$20.55 billion
Rev. per Employee
$887,847
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Dividend Yield
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P/E Ratio
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Dividend Yield
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$21.64 billion
Rev. per Employee
$617,552
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US : U.S.: NYSE
$ 75.65
-0.25 -0.33%
Volume: 2.73M
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P/E Ratio
72.39
Dividend Yield
3.33%
Market Cap
$61.22 billion
Rev. per Employee
$817,746
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US : U.S.: NYSE
$ 25.74
-0.41 -1.57%
Volume: 3.57M
June 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.34%
Market Cap
$17.42 billion
Rev. per Employee
$1.18M
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US : U.S.: NYSE
$ 10.11
-0.15 -1.46%
Volume: 7.86M
June 22, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$20.37 billion
Rev. per Employee
$769,542
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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