Last Week in Utilities: How These Defensives Played Out

Utilities gain

Utilities continued to show strength and outperformed the broader market for the third consecutive week in the week that ended on October 19. The Utilities Select Sector SPDR ETF (XLU), a representative of the S&P 500 Utilities Index, rose more than 3%, while broader markets rose only marginally.

Investors’ flight to safety boosted defensive sectors such as utilities amid market turmoil caused largely by the trade disputes between the United States and China.

Last Week in Utilities: How These Defensives Played Out

Utilities, one of the most sensitive sectors to interest rates, have shown a notable uptrend despite there being a rate hike in September. Utility stocks and Treasury yields generally trade inversely to each other. The ten-year Treasury yield was strong and rose from 3.16% to 3.19% last week.

Leaders and laggards

Renewables giant NextEra Energy (NEE) stock rose 2.4% in the week, while Duke Energy (DUK), the second-largest utility by market cap, surged ~3.5%. Southern Company (SO) stock rose 3.4%, and Dominion Energy (D), the laggard among top utilities this year, rose 3%.

Southern Company declared a quarterly dividend of $0.60 per share last week. Its ex-dividend date is November 16, and its dividend will be paid on December 6.

According to a report by Reuters, Dominion Energy received approval from the FERC (Federal Energy Regulatory Commission) last week to cut trees in Buckingham County, Virginia, as a part of the construction of the Atlantic Coast Pipeline. The ~$6.0 billion pipeline project travels from West Virginia to North Carolina and is jointly owned by Dominion Energy, Duke Energy, and Southern Company.

FirstEnergy (FE) and AES Corporation (AES) stocks hit their 52-week highs last week. The two have shown a solid rally recently and have soared 27% and 38%, respectively, so far this year.