Skip to main content
number cruncher

What are we looking for?

U.S.-listed utilities stocks to add some defence to our portfolios.

The Utilities Select Sector SPDR Fund (XLU-NYSE Arca) is up 6.4 per cent over the past six months, which is positive, but lagging behind all other S&P 500 sectors. However, with the CBOE Volatility Index, or VIX, jumping more than 55 per cent on Wednesday amid the U.S. earning season, it might not be a bad time to start thinking about defending your portfolio with some dividend-paying utilities stocks.

The screen

We will be using Trading Central Strategy Builder to search for U.S.-listed utilities stocks poised to outperform the broad market in case of a market correction.

We begin by setting a minimum market capitalization threshold of US$10-billion in order to screen for well established large-cap stocks, which tend to have less risk and volatility than small caps. Next, we will select only stocks with price-to-earnings ratios at or below the P/E of the S&P 500 index, which is at 30. We are also interested in companies that have a dividend yield better than the average of the S&P 500 (about 1.6 per cent), in order to generate cash flow if North American indexes start to turn bearish.

We will screen for companies that have a positive average dividend growth rate over the past five years, which indicates a stable dividend. Finally, we want companies with the lowest possible debt-to-equity ratio, which compares the level of debt with the amount of shareholder equity. The higher the ratio, the more leveraged the company is, which could indicate a higher market risk.

We have also included year-to-date and one-year price return for reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener is available through leading retail brokers in Canada and worldwide.

What we found

Topping our list is Algonquin Power & Utilities Corp., a North American renewable energy and regulated utilities company based in Oakville, Ont., and listed on Canadian and U.S. stock exchanges. The company has the highest five-year average dividend growth rate on our list, at 9.4 per cent, and the second-lowest debt-to-equity ratio at 0.9. The stock is also the best performer on our list with a year-to-date performance of 2.8 per cent and a one-year performance of 11.2 per cent.

Chicago-based Exelon Corp.’s U.S. power generation portfolio includes a mix of low-carbon resources, including solar, wind, nuclear and hydropower facilities. The company has the largest market cap on our list at US$40-billion, and a dividend yield of 3.7 per cent.

The utility company with the highest yield on our list – 4.3 per cent – is Consolidated Edison Inc., a holding company whose business segments include Con Edison of New York, an electric, gas and steam utility; Orange & Rockland Utilities, an electric and gas utility; Con Edison Clean Energy Businesses Inc., and Con Edison Transmission Inc.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

U.S.-listed utilities stocks to add some defence to our portfolios
RankCompanyTickerMkt. Cap. (US$ Bil.)Div. Yld. (%)5Y Div. Grth. Rate (%)Debt/Eq.P/EYTD Perf. (%)1Y Perf. (%)Recent Price (US$)
1Algonquin Power & UtilitiesAQN-N103.79.40.9020.62.811.217.02
2Public Service EnterprisePEG-N293.54.41.1014.9-3.3-6.257.54
3WEC Energy Group Inc.WEC-N293.
4Atmos Energy Corp.ATO-N112.880.718.6-4.8-21.991.29
5Exelon Corp.EXC-Q403.741.216.9-2.8-14.242.52
6Sempra EnergySRE-N353.57.91.318.5-5.9-24.4122.84
7Evergy Inc.EVRG-N12.
8Consolidated Edison Inc.ED-N24.
9Alliant Energy Corp.LNT-Q12.
10Ameren CorpAEE-N18.602.73.61.322-3.8-7.375.57

Source: Trading Central

Gary Christie is head of North American research at Trading Central in Ottawa.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 04/03/24 4:00pm EST.

SymbolName% changeLast
Algonquin Pwr & Util
Public Service Enterprise Group Inc
Wisconsin Energy Corp
Atmos Energy Corp
Exelon Corp
Consolidated Edison Company
Alliant Energy Corp
Ameren Corp

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe