Utilities are seen as one of the least exciting sectors across broader markets mainly due to their slow stock movements. However, this is a big positive from an investment perspective.
In this series, we’ll look at the S&P 500 Utilities stocks that have generated the highest total returns over the past five years. These stocks have significantly outperformed the broader markets in this period.
NextEra Energy leads the pack
Renewables giant NextEra Energy (NEE) holds the top spot with a total return of 145% in the last five years. NextEra Energy’s consistent and above-average earnings growth has influenced its stock performance and fueled its superior dividend growth in the last few years. In comparison, the Utilities Select Sector SPDR ETF (XLU) has returned 70% in the same period. The total returns of the broader markets have come in at ~90% in the last five years.
NiSource (NI), which is mainly involved in natural gas operations, has delivered the second-highest return of 138% in the last five years. Its stupendous rally in this period has been the main contributor to its total returns. Midsize regulated utility Xcel Energy (XEL) has returned 105%, while CMS Energy (CMS) has returned 120% in the same period.
The Fed’s interest rate normalization, which began in December 2015, has created periodic weakness in this interest rate-sensitive sector. However, the slow and stable earnings and dividend growth of these utilities have led to their outperformances.