Broader markets outperform utilities
Utility stocks are generally perceived as slow-moving but steady-going. This series will take you through the S&P 500 Utilities stocks that have shown massive growth this year and outperformed not only utility peers but also broader markets.
The Utilities Select Sector SPDR ETF (XLU), which represents S&P 500 Utilities Index, has managed to gain more than 10% so far this year, marginally underperforming broader markets. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) rose 13% in the same period.
Most rallied stocks
The top rallying stock this year is the smallest component of S&P 500 Utilities Index, NRG Energy (NRG). NRG stock has shown a massive gain of 110% YTD (year-to-date). Elliott Management and Bluescape Energy Partners disclosed their stake in the largest but struggling merchant power producer NRG in January 2017. Elliott’s interest in NRG Energy, NRG’s transformation plan, and a few rating upgrades have all boosted a solid rise for NRG.
The largest utility holding company by market capitalization, NextEra Energy (NEE), holds the second spot among the best-rallying utility stocks of 2017. NEE’s better-than-expected quarterly earnings and above-average dividend growth appear to be the key factors behind NextEra Energy’s rally.
Notably, investors have chosen NextEra despite its inferior dividend yield. Investors generally favor safe and stable stocks during market uncertainty, keeping stable dividend incomes in mind. However, at 2.6%, NextEra is one of the lowest-yielding stocks among XLU utilities.
Xcel Energy (XEL) is one of the largest regulated utilities, with notable earnings stability. It has rallied more than 17% so far in 2017. CenterPoint Energy (CNP), a relatively smaller utility, has risen nearly 17%. CNP operates in Texas and has a strong dividend profile—one of the laggards last year, due to its exposure to Enable Midstream Partners (ENBL). NiSource (NI), a gas-major utility, has risen 16% YTD.