Among large cap utility stocks, Dominion Resources (D) has been the best performing utility stock for the last five years. Dominion’s share price nearly doubled in the last five years. The stock was trading at $36.54 at the beginning of 2009. Currently, it trades at levels of $70.
Also, the company paid handsome dividends each quarter. This created wealth for investors.
Broad indices and the Utility Index
Utility stocks are defensive in nature. They pay higher dividends to investors compared to other industries. They underperform the broad markets when the economy is growing. They perform better than the market during a slowdown in the economy. These companies’ earnings are steady. They aren’t affected by business cycles.
In the last five years, the economy expanded. As a result, the Utility Index lagged the benchmark indices. However, Dominion consistently performed at par to the benchmark indices. Dominion’s total shareholders return for five years until 2013 was 124.3%.
Total shareholder returns are the sum total of dividend income and share price appreciation. In comparison, the total returns for the Utility Index were only 53.2% during this period.
Returns this year
Shareholder returns slowed down this year. Until October 2014, Dominion grew investor’s wealth by 13.2%. Dominion’s peers—Duke Energy (DUK) and Southern Company (SO)—had higher returns of 16.4% and 17.2%, respectively.
The Utilities Select Sector SPDR (XLU) is a key exchange-traded fund (or ETF) in the utilities sector. It generated total returns of 17.8% for investors.