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The Top S&P 500 Utility Dividend Growers


Mar. 1 2018, Published 12:22 p.m. ET

How did the utility sector perform in 2018?

As 2018 began, it brought a lot of surprises with it. The economy adjusted to lower unemployment and higher wages driven by construction, food services and drinking places, healthcare, and manufacturing.

The passage of the Tax Cuts and Jobs Act of 2017 brought widespread tax reforms, and February opened with several bouts of market carnage led by the Dow Jones Industrial Average. Plus, petroleum and natural gas triggered higher-than-expected inflation.

The utility sector, represented by the Broad Global Market US Index, recorded the second-highest dividend yield after the telecom sector. The utility sector recorded a dividend yield of 3.8% and a price loss of 5.4% on a year-to-date (or YTD) basis.

The top S&P 500 utility sector dividend growers have beaten the dividend yields of the broad-based indexes individually and as a group. We’ll discuss the top five stocks in this part of the series and the remaining five stocks in a follow-up series.

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How have the broad-based indexes performed?

The S&P 500 offers a dividend yield of 2.3% and a PE (price-to-earnings) ratio of 23.7x. It rose 10.0% and 19.0% in 2016 and 2017, respectively. However, it has gained 2.3% YTD. The SPDR S&P 500 ETF (SPY) tracks the S&P 500.

The Dow Jones Industrial Average has a dividend yield of 2.2% and a PE ratio of 22.8x. It rose 13.0% and 25.0% in 2016 and 2017, respectively, and it has gained 2.0% YTD. The SPDR Dow Jones Industrial Average ETF (DIA) tracks the Dow Jones Industrial Average.

The NASDAQ Composite has a PE ratio of 25.7x. It posted returns of 8.0%, 28.0%, and 4.9% in 2016, 2017, and 2018 YTD, respectively. The Fidelity Nasdaq Composite Index Tracking Stock ETF (ONEQ) tracks the NASDAQ Composite.

Dividend ETFs with exposure to the utility sector

The ProShares S&P 500 Aristocrats ETF (NOBL) has a PE ratio of 21.0x and a dividend yield of 1.7%. NOBL has 2.0% exposure to the utility sector. The iShares Core Dividend Growth ETF (DGRO) has a PE ratio of 20.6x and a dividend yield of 2.0%. DGRO has 4.0% exposure to the utility sector.

In this series, we’ll explore the utility sector’s dividend growth and payouts, price movements, revenue and earnings drivers, and outlook.


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