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How China Helped Utilities Stocks and the XLU ETF Gain

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Utilities continue to gain

Out of 40 utilities we track, 38 gained during the week ended August 14. The Utility Select Sector SPDR ETF (XLU) gained 2.6%, outperforming the broader market. The broad-based SPDR S&P500 ETF (SPY) gained 0.7% during the week.

China’s devaluation of the yuan was one major reason behind investors flocking to utilities. Devaluation of the yuan made investors worry about China’s growth, making them move to safer assets such as utilities. Utilities operate in a generally predictable environment and offer an attractive dividend yield, making them safer than some other sectors.

US Treasury yields across maturities remained volatile due to the yuan’s devaluation.

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Top gainers

The Houston-TX based Dynegy (DYN), the biggest sectoral loser of the previous week, emerged as the top gainer with a 12.3% gain during the week. The company reported higher-than-expected revenues in profitability in 2Q15. The company reported 60% higher revenues than in 2Q14. Moreover, the company reported net income for the first time in five quarters. EPS came in at $2.73 a share in 2Q15 compared to losses of $0.05 a share in 2Q14.

The Princeton, New Jersey, based NRG Energy (NRG) gained 6.1% to end the week at $20.79 with a market capitalization of $6.9 billion and a dividend yield of 2.74%.

The Topeka, Kansas, based Westar Energy (WR) gained 4.6% to end the week at $39.74 with a market capitalization of $5.6 billion and a dividend yield of 3.57%.

Dominion Resources (D), the largest player in the sector, gained 4.2% to end the week at $75.37 with a market capitalization of $44.8 billion and a dividend yield of 3.31%.

Only losers

Hawaiian Electric (HE) and Entergy (ETR) dropped 1.3% and 0.2%, respectively. NextEra Energy (NEE) has agreed to acquire Hawaiian Electric. However, HE is volatile due to uncertainty about the deal.

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