What are we looking for?
Although the broader U.S. markets are almost flat year-to-date, the utility sector has not fared so well. The Dow Jones utility average is down about 9 per cent in the same period on concerns that a series of interest rate increases by the U.S. Federal Reserve would remove the appeal of dividend-paying utility stocks.
In recent weeks though, many market watchers have changed their expectations from a series of interest rate increases to what might be described as a "one and done" approach. In this view, utility stocks may have sold off too far and may be poised to shine in the coming months.
The screen
We will be using Recognia Strategy Builder to search for U.S. utility stocks which sold off over the past year.
We begin by setting a minimum market capitalization threshold of $20-billion (U.S.) to focus on larger, more established utility companies in the market. Next, to find stocks that have already sold off, we will look for companies are currently trading at least 10 per cent below their 52-week highs.
Finally, since it is the dividend income that is one of the key attractions of utility stocks, we will screen for companies with a dividend yield of at least 3 per cent.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.
What did we find?
Exelon Corp. has had the biggest decline on our list, now trading almost 29 per cent below its 52-week high. On Oct. 30, the company announced third-quarter results that beat analyst expectations on both revenue and earnings. The stock was little moved by the news and hovers near its 52-week low.
Duke Energy Corp. of Charlotte, N.C., is the largest company on our list with a market cap of $46.8-billion. Duke is the largest electric power holding company in the United States, with operations as well in Canada and Latin America. Duke Energy has an attractive 4.9 per cent dividend yield and is currently trading down more than 24 per cent from its 52-week high.
Southern Co. is an electric utility holding company based in Atlanta. The company is one of the largest producers of electricity in the United States. The company has a very high dividend yield of 4.9 per cent and is trading 16 per cent off its 52-week high.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.