These dividend stocks are sending a ‘bad news’ buy signal

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Investors seeking high-yielding dividend income may want to defy the distress signal flashing on some blue-chip utility stocks.

Rising interest rates have pushed down the price of electrical utility stocks in recent months, and this has in turn sent their dividend yields higher. The combination of falling prices and rising yields suggest a stock is falling out of favour with investors, which makes sense as far as utility stocks go. They're classic rate-sensitive stocks and could remain under pressure until rates stabilize and move lower.

But that's a one-dimensional view. If you consider dividends as well as share price, the current weakness in utility stocks could be a buying opportunity for long-term investors seeking dividend income. Tom Connolly of DividendGrowth.ca recently highlighted four utilities with yields that caught his eye. The four are:

- Canadian Utilities Ltd. (CU-T): The yield during the last week of February was 4.5 per cent; Mr. Connolly said that when the yield reached 4.6 per cent last week, it was the highest level since 2000.

- Emera Inc. (EMA-T): The yield hit 5.6 per cent last week, which is right around the high reached during the stock market plunge of early 2009.

- Atco Ltd. (ACO.X-T): At 3.6 per cent, Mr. Connolly said this company's yield is the highest in decades.

- Fortis Inc. (FTS-T): The yield, now just above 4 per cent, was only a little higher in the dark days of 2009 and 2002. Mr. Connolly said the average yield since 2000 has been 3.8 per cent.

All of these stocks have been roughed up in early 2018 – the average decline for the four over the year through Feb. 20 was 7.9 per cent. All but Fortis are also down on a cumulative basis over the past three years.

What these stocks have going for them is a high-yielding, stable dividend that you can reasonably expect to move a little higher every year. If you're an income-focused investor willing to hold over the long term, this is much more of a story than share price volatility caused by fear of rising interest rates.