How the Implied Volatility of Utilities Compares to Broader Markets
On December 8, 2017, the implied volatility of the Utilities Select Sector SPDR ETF (XLU) was near 10%, marginally lower than its 15-day average implied volatility.
According to a recent report, Citi Investment Research is the largest institutional investor in XLU as of September 30, 2017.
Utility stocks have only marginally underperformed broader markets so far this year.
On December 8, 2017, the Utilities Select Sector SPDR ETF (XLU) was trading 1% above its 50-day and 5% above its 200-day moving average.
NextEra Energy (NEE), the biggest constituent of the S&P 500 Utilities Index, has a mean price target of $160.6 against its current market price of $159.0.
Broader markets continued to make new highs on the expected tax reforms while utilities fell approximately 1% last week.
According to Wall Street analysts, Dominion Energy (D) stock has a mean price target of $81.86, which implies a flat to negative movement going forward.
On December 5, 2017, Dominion Energy stock was trading 3% above its 50-day moving average and 6% above its 200-day moving average.
Implied volatility for Dominion Energy (D) stock is currently 13%, which is marginally higher than its 15-day average implied volatility.
Dominion Energy’s (D) top institutional investor, the Vanguard Group, increased its stake in the utility in 3Q17.
Dominion Energy (D) is currently trading at a dividend yield of 3.8%, which is higher than the industry average of 3.5%.
In 2017, Dominion will pay a total dividend of $3.04 per share. That’s a 10% increase over 2016.
Dominion Energy (D) hasn’t reported positive free cash flow in the last five years.
Dominion Energy’s (D) total debt increased after its Questar acquisition last year.
Dominion Energy’s (D) earnings were notably stable in the last few years and experienced earnings growth above the industry average.
US utilities have been experiencing flat electricity demand growth for the last several years, driven by increasing energy efficiency initiatives.
Dominion Energy (D) is currently looking expensive compared to its peers and to its historical average.
Dominion Energy (D) has significantly lagged behind its peers in terms of total returns in the past year.
Dominion Energy stock has underperformed the broader utilities since the beginning of 2017. It has managed to gain a little more than 9% year-to-date.
PPL Corporation’s (PPL) 4% per year dividend increase is on the lower side compared to its peers.