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Top Utilities: Analyzing the Total Returns

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Total returns

Usually, investors prefer utilities due to their relatively higher yields and stable market performance. However, the low-yielding utilities outperform the higher-yielding utilities in the long run. NextEra Energy (NEE), the biggest component of the Utilities ETF (XLU) and the lowest-yielding utility, significantly outperformed utilities at large. NextEra Energy returned 24% in the past year and 76% in the last three years.

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In comparison, the Utilities Select Sector SPDR ETF (XLU) returned 17% in the past year and 35% in the last three years. Among the top utilities, only NextEra Energy consistently outperformed its peers due to its superior earnings growth. NextEra Energy yields 2.6%.

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Top-yielding utilities underperformed   

Southern Company (SO) and Duke Energy (DUK) offer dividend yields of 4.8% and 4.1%, respectively—higher than utilities’ average yield of 3.3%. Southern Company and Duke Energy returned 20% and 22% in the past year. In the last three years, Southern Company and Duke Energy’s total returns were 19% and 37%, respectively. Southern Company and Duke Energy showed relatively lower earnings growth in the last three years compared to their peers.

Dominion Energy’s (D) returns were 4% in the past year and 20% in the last three years. Dominion Energy underperformed utilities at large. Currently, Dominion Energy yields 5%.

NRG Energy (NRG), one of the smallest components of the Utilities ETF (XLU) returned 320% in the last three years. Read Analyzing NRG Energy before Its Q4 Earnings to learn more.

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