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Utilities’ Returns Compared to Broader Markets

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Utilities’ total returns

Investors generally take shelter under the relatively safer utilities sector amid broader market volatility. Utility stocks usually pay stable dividends and have steady stock price movements. Utilities have outperformed broader markets over the past 12 months. On average, utilities have returned 25% including dividends, while the S&P 500 has returned 9% over the past 12 months.

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Over the past five years, utility stocks have returned ~11% compounded annually—largely in line with the broader markets. The utility (XLU) sector is one of the most susceptible sectors to interest rate hikes. The utility sector continued its solid performance despite the Fed starting rate normalization in December 2015. Utilities’ stable earnings and dividend growth influenced their stable returns during this period.

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Utility stocks that outperformed peers

Many utility stocks outperformed the industry returns over a longer period of time. NextEra Energy (NEE) returned 30% over the past 12 months. The company annualized returns of 18% in the last five years. NextEra Energy’s consistent earnings and dividend growth facilitated such a solid performance.

Xcel Energy (XEL) beat its peers significantly in terms of total returns. The company returned 44% in the past year and annualized returns of 17% in the last five years.

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