Dividend Growth from Utilities is for...
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John Murphy
Dividend Growth from Utilities is for those Concerned about the Bull Market Ending
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While a bull market in stocks can go on longer than the 5 years for the current one, it is understandable that many are concerned that there is due a pullback. That has certainly not impeded the recent performance of stocks, though, as the Dow Jones Industrial Average (NYSE: DIA) is up more than four percent for the last quarter of market action, with the Standard & Poor’s 500 Index (NYSE: SPY) rising nearly six percent for the same period.  For long term investors worried about a dip but wanting to stay in the market, high yield utility stocks such as Consolidated Edison (NYSE: ED), Duke Energy Corp. (NYSE: DUK), and Southern Company (NYSE: SO) are very appealing.

At present, the dividend yield for the average member of the Standard & Poor’s 500 Index is under two percent.

For Southern Company, the dividend is 4.67 percent.  The dividend yield for Duke Energy is 4.44 percent.  Consolidated Edison has a dividend yield of 4.63 percent.  The dividend yield is very important for the total return of an equity.  Investing legend Jack Bogle, the founder of the Vanguard Group of mutual funds, reports that dividend income has made up more than 45 percent of the historic total return for an equity.

What makes utility stocks ideal for the long term investor is the history of dividend growth.

The dividend growth rate for the utility sector is over 5 percent.  That means that the dividend amount will double about every 14 years.  Not only are the shareholders of utility stocks like Duke Energy and Southern Company paid to own the shares, but a raise is received when the dividend is increased.

As with so many other stocks, utilities have done well in the bull market over the past five years.

What makes the sector appealing in a down market is that utilities are traditional defensive stocks.  That means investors buy as they know these stocks hold up well in down markets.  Much of that has to do with the strong dividend income.   With the high yields of Consolidated Edison, Duke Energy, and Southern Company, that adds even more to the total return for the long term.


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