The utilities sector is one which has continued to do very well this year, with the vast majority of utilities companies appreciating, on average, about 10% since the beginning of the year. Stable cash flows and counter-cyclical business models make utilities great plays for investors looking for more stability in a stock market which has seen valuations climb to, in some cases, all-time highs.
The utilities sector is one which I have preferred for a long time due to the nature of utilities becoming rarer over time, as well as a few of the macroeconomic trends with the industry which I find very compelling.
First off, many of the better utility companies have begun investing in renewable energy projects, reducing their exposure and reliance on traditional forms of energy and paving the way for the growth drivers of the future.
Secondly, specialized utilities in water treatment or similar municipal services provide investors with unique assets that are nearly impossible to replicate, ensuring such a moat can never be crossed.
For investors looking at the utilities industry broadly (as I am) and are unwilling to pick and choose which utilities companies they prefer the most, I would consider taking a look at Vanguard Utilities ETF (NYSE:VPU) as a very effective proxy for the industry as a whole.
Given the high yields provided by most utilities concerns, this ETF is able to offer investors a yield of more than 3.2% - not too shabby for a broadly diversified portfolio of stocks.
Invest wisely, my friends.
