Utilities’ Premium Dividend Yield



Dividend yield

Investors usually prefer utilities due to their ability to pay higher dividends. Currently, utilities are trading at an average dividend yield of 3.5%. In comparison, broader markets yield ~1.7%. Interestingly, the top utilities like Southern Company (SO) and Duke Energy (DUK) yield ~5.2% and 4.7%, respectively. Dominion Energy yields 4.4%, while NextEra Energy offers a dividend yield of 2.6%—one of the lowest dividend yields in the sector.

XLU dvd

Going forward, utilities on average are targeting an earnings growth rate of ~4%–6%, which might influence their dividend growth around similar levels. Considering fair earnings and dividend growth going forward, utilities might continue to be among the top-yielding sectors.

NextEra Energy (NEE) and Dominion Energy (D) are aiming for an annual dividend growth of 13% and 10%, respectively—more than double the industry average.

Utilities are perceived as slow-moving and less interesting. With respect to stable and reliable dividends, these defensives are vital. To learn more, read These Utilities Have Raised Dividends for More than 40 Years.

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