Three Utility ETFs Worth A Look

In a time when fear and uncertainty are causing the stock market to take a roller coaster ride, the attractiveness of the utility sector remains intact, and for good reason.

In general, the utility sector is known for shooting off decent dividends and carries a relatively high degree of safety. The sector remains a safe haven and tends to shine in times of uncertainty because the services that it offers are an indispensible part of life, enabling utilities to have reliable earnings streams.

Another reason utilities remain attractive is because they have overcome many of the regulations that once hindered their performance by driving up operational costs.

Additionally, in a low growth environment, which the U.S. currently is in, utilities provide a yield that is greater than their debt, further boosting their appeal.  Currently, major utility players are generating yields of 4%-5%.

Lastly, there doesn’t seem to be much improvement in the overall health of the U.S. economy.  Unemployment levels remain stubbornly high and don’t seem to be improving; consumer confidence remains wary in both the current state of the economy and where it is heading in the near-term future.

Some diversified ways to gain access to major utilities like Exelon Corporation (EXC), Southern Company (SO), Dominion Resources (D) and Duke Energy (DUK) include:

  • the Vanguard Utilities ETF (VPU)
  • the iShares Dow Jones US Utilities Sector Index Fund (IDU)
  • the Utilities Select Sector SPDR (XLU)

When investing in these ETFs, it is equally important to do so with caution. A good way to implement this is through the use of an exit strategy which identifies specific price points at which a downward trend is highly likely to occur.

Disclosure: No Positions

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About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

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