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Utility Stocks: Which Quantitative Indicators Could Be Key?

PART:
1 2 3
Part 2
Utility Stocks: Which Quantitative Indicators Could Be Key? PART 2 OF 3

Week of April 24–28: Utility Stocks in Focus

Utility stocks with high implied volatilities

NRG Energy (NRG) has risen 13.6% in the past year. It also has the highest implied volatility of all the utility companies that make up the Utilities Select Sector SPDR ETF (XLU), as we saw in the previous part of this series.

Week of April 24–28: Utility Stocks in Focus

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In the past five days, NRG Energy has fallen 0.8%, while XLU has fallen 0.1%. The S&P 500 Index (SPY)(SPX-INDEX) rose 1.5% during the week. The utility sector accounts for ~3.2% of the S&P 500 Index.

The above chart shows the trailing one-year and five-day returns of the stocks we identified in the previous part as having high and low implied volatilities. High implied volatility stocks saw sharper movements and tended to fall—compared to low implied volatility stocks.

Among high implied volatility stocks, AES (AES) has risen the most in the last five days, while Exelon (EXC) has fallen the most.

On April 25, 2017, Exelon announced a dividend of $0.33 per share for 1Q17—unchanged compared to 4Q16. On the same day, the stock fell 1.2%.

Pinnacle West Capital (PNW) rose the most in the past year among high volatility utility stocks. On April 19, 2017, it announced a quarterly dividend of $0.67 per share.

Scana (SCG) rose the least among high volatility utility stocks in the trailing year. On April 27, 2017, it reported its 1Q17 earnings. It reported net income of $1.19 per share—compared to analysts’ estimates of $1.34 per share.

Returns of utility stocks with low implied volatilities

Among low implied volatility utility stocks, Southern Company (SO) was the only loser in the last five days. It was also smallest gainer in the past year. On April 17, 2017, it announced a dividend of $0.58—3.6% higher than the previous quarter. Its annualized dividend was $2.32 per share­.

In the next part of this series, we’ll look at utility stocks with the highest short interest-to-equity float ratios. High short interest in a stock can cause its implied volatility to rise.

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