In this part, we’ll discuss the top-rallied utilities’ total returns. We’ll see whether the utilities delivered consistent returns in the last few years. NRG Energy (NRG) has returned 47% in 2018. In the last five years, NRG Energy has returned 9% compounded annually. AES (AES) has returned 51% in 2018 and 5.3% compounded annually in the last five years.
AES outperformed NRG Energy
We have considered dividends paid and stock appreciation in a particular period to calculate the total returns. NRG Energy paid trivial dividends, while AES offers a dividend yield of 3.5%. On average, broader utilities yield ~3.4%. AES has outperformed NRG Energy in terms of total returns in 2018. AES’s dividends also grew significantly in the last few years.
FirstEnergy (FE) has returned 33% in 2018 and 8% compounded annually in the last five years. Currently, FirstEnergy yields 3.8%.
Exelon (EXC) has returned 23% YTD (year-to-date). In the last five years, the company has returned 14% compounded annually. Exelon stock is trading at a yield of 3%, which is lower than many of its peers.
Interestingly, utilities haven’t just outperformed broader markets in 2018. Since the Fed started interest rate normalization in December 2015, utilities (XLU) at large have returned 13.6% compounded annually. The S&P 500 has returned 10.3% compounded annually during the same period. Higher interest rates are usually considered to be a deterrent to utilities.