Opinions on Utilities/XLU

[MichealKnight]

Greetings all....

My goal/plan/need is basically over a medium term- to average 5% returns. Anything under 4.5% will hurt a bit, anything over 5.5% will be gravy.

I've had a decent position in XLU and in 1 year - it's up 20% plus about 2.5% or so in dividends. It's at a 52 week high and it seems to be at an all time high.

Part of me itches to make the 20% official - and wait for something else. But then again - between increasing population turning the lights on .....and a long term plan of upgrading grids, and the "EV! EV!" thing coming....I'm thinking - maybe it's still a rather safe place to depend on a 2.5% div and 2-3% average appreciation.

Would appreciate any thoughts..... thanks

 

[DrRoy]

Sometimes when in doubt I split the difference and do half.

 

[Montecfo]

Utilities seem too expensive for such minimal growth, speaking very generally.

I prefer banks and selected drug companies. Many still cheap.

 

[MarieIG]

https://finance.yahoo.com/quote/XLU/profile?p=XLU

Perhaps on a dip in an IRA. (I nibbled at the Vanguard utility ETF in my IRA when it was down, but too high for me at the moment.) Easy enough to put in a limit order if it goes down.

 

[CyclingInvestor]

I have a fair amount in utilities. I looked at XLU and saw a bunch of giant electrical utilities (plus AWK), not enough diversity for me. Instead I purchased my own set, split between electric /gas, water, trash, and wholesale electric. They currently pay about a 2.6% dividend, growing at 7-8% annually as a group.

 

[MichealKnight]

Thanks all

I read all replies.

I've sold half my XLU. (Hint that means you should buy it - when I sell something it goes up)

Between XLU and UTG I've still got a decent slug of utilities.

 

[target2019]

Just individual companies: DUK and SO.

 

[Dash man]

I’ve had DUK since 2018 and added a bunch in 2020. Overall it’s up 43% plus all the juicy dividends I collect, nearly $8,000/year. I buy broad market ETFs, but not sector focused ETFs. I prefer to buy a good individual stock in the sector.

 

[Surewhitey]

I'm torn on our EXC and CEG positions. We've had them for 10 years and are up 55% & 114% plus dividends. Most of this is since they spun off CEG. Post split, EXC pays a 2.92% currently and CEG, .71%. I expect these to increase, especially CEG...

The electric market rate is up 40% yoy in TX, so nuclear power is banking on this as the increase is likely driven by natural gas costs for generation. CEG is one of the largest nuclear producing companies in my studies. They're also supposed to benefit from the recent clean energy bill recently signed.

But they have doubled this year... 1st world problems.

 

[FLJim]

Just individual companies: DUK and SO.

For me, DUK, SO, NEE, NEP, and especially WEC. I spend dividend income, not "percentages".

 

[steelyman]

I'm torn on our EXC and CEG positions. We've had them for 10 years and are up 55% & 114% plus dividends. Most of this is since they spun off CEG. Post split, EXC pays a 2.92% currently and CEG, .71%. I expect these to increase, especially CEG...

The electric market rate is up 40% yoy in TX, so nuclear power is banking on this as the increase is likely driven by natural gas costs for generation. CEG is one of the largest nuclear producing companies in my studies. They're also supposed to benefit from the recent clean energy bill recently signed.

But they have doubled this year... 1st world problems.

I received some CEG from the EXC spinoff and bought a few more (to get to round lots). I’ll be hanging on to both.

I came across the following recent article/news release about an agreement between CEG and Chicago:

https://www.constellationenergy.com...-Clean-Renewable-Energy-Starting-in-2025.html

 

[pb4uski]

I read all replies.

I've sold half my XLU. (Hint that means you should buy it - when I sell something it goes up)

Between XLU and UTG I've still got a decent slug of utilities.

I was too late, but I would have suggested putting in a stop loss order slightly below the current price and then ratcheting it up periodically if the stock went higher. Best of both worlds.

 

[target2019]

For me, DUK, SO, NEE, NEP, and especially WEC. I spend dividend income, not "percentages".

I'm familiar with DUK and SO.

Your NEE, NEP and WEC seemed interesting, so I peeked on Yahoo Finance and compared them to SO for 1-year, and 2-years, etc. I see that these may be appropriate for a smaller dividend and perhaps more growth.

But I now have a hard rule about trading. If I believe strongly in a company that is not in my list, then I must eliminate a current holding. Otherwise, new money goes to SCHD and SPYD.

 

[Winemaker]

Years ago, someone on this forum suggested BUI, a leveraged utility ETF, as a buy and hold for a large portion of a portfolio. While I did invest a 5% portion of my portfolio, it has been shedding nice dividends for a while, ranging in price $21-26 over the years. While I have considered selling it, given Blackrock's ESG policy, I haven't found a suitable replacement. Following this thread.

 

[NW-Bound]

I have 3% of investable assets in XLU and VPU (Vanguard). These are good stable equities, which I don't pay much attention to. Just now, looked on Portfolio Visualizer, and saw that they ran neck-to-neck since 2005. Moreover, they roughly keep up with the S&P.

How about that for the most boring sector of the market? Son of a gun. Maybe I should put a little more into it.

PS. Portfolio Visualizer says that XLU and VPU have tripled since 2005, after inflation adjustment. That's 6.68% per year after inflation. Son of a gun!

PPS. I used to pick individual utility stocks, but switched to utility ETFs some years ago.

 

[NW-Bound]

I just looked further, and found that utility stocks are 2.6% of the S&P. Hence, I am just about matching the weight in my own portfolio. Given that I never have much of the stinkin' bonds, I should have a bit more in these boring dividend-paying stocks.

 

[MarieIG]

Bought a tiny bit of the hair of the dog . . . PEG and NGG.

Have limit orders in to add a tad more if there are any significant drops.

 

[mojavesue]

I inherited a bit of AEP a couple of years ago. Its held up fairly well the past year.

 

[Dash man]

I’ve had AEP and DUK for a long time. They’re a steady dividend payer and the stock prices have held up well compared to others.

 

[MarieIG]

Somewhere along the line, I got a bit more VPU at the 135 level. I expect that it will drop further as interest rates rise, and I will nibble a little more at lower levels. If it drops below 125, I will migrate what I have in my IRA to my Roth, and let it sit there long term and reinvest dividends, i.e. I anticipate that it will be a long term holding for me.

 

[MarieIG]

Somewhere along the line, I got a bit more VPU at the 135 level. I expect that it will drop further as interest rates rise, and I will nibble a little more at lower levels. If it drops below 125, I will migrate what I have in my IRA to my Roth, and let it sit there long term and reinvest dividends, i.e. I anticipate that it will be a long term holding for me.

Well, I'm still waiting for the big drop on VPU . . .

I'm telling myself patience is a virtue.

 

[milford]

Well, I'm still waiting for the big drop on VPU . . .

I'm telling myself patience is a virtue.

VPU has been on my radar since it dropped quite a bit a month ago and I was looking for an entry point around 135, but its been going up like gangbuster the past month in which I don't see the value play anymore. With recession talk looming it'll probably be more resilient than most sectors. Just glad to be collecting 4-5% yield while I'm waiting it out as well

 

[MarieIG]

VPU has been on my radar since it dropped quite a bit a month ago and I was looking for an entry point around 135, but its been going up like gangbuster the past month in which I don't see the value play anymore. With recession talk looming it'll probably be more resilient than most sectors. Just glad to be collecting 4-5% yield while I'm waiting it out as well

Yes, I saw that - but it didn't get to my target price either.

 

[target2019]

I see that VPU yield is 3.11%. https://ycharts.com/companies/VPU/dividend_yield

DUK is 4.07% at this time. That's at a NAV of $98+.

Does anyone use the following to calculate when to buy more?

An example is DUK paying $4 at a share price of $100, giving you a yield of 4%.

To buy more, wait for 5% yield. So in this case you'd wait for DUK to decline to $80.

Can't remember where I heard that RoT - buy individual utility stock at 5% yield.

 

[MarieIG]

I see that VPU yield is 3.11%. https://ycharts.com/companies/VPU/dividend_yield

DUK is 4.07% at this time. That's at a NAV of $98+.

Does anyone use the following to calculate when to buy more?

An example is DUK paying $4 at a share price of $100, giving you a yield of 4%.

To buy more, wait for 5% yield. So in this case you'd wait for DUK to decline to $80.

Can't remember where I heard that RoT - buy individual utility stock at 5% yield.

I do have some individual utilities - but try to keep exposure of single utilities down. I bought the two which were sending me big, fat, bills. (One is over 5% the other is over 3%.) I try to look at the "health" of the utility, as well as the dividend as sometimes the dividends spike when the price drops due to an ongoing problem. If a stock is being punished due to a total market drop - that's a different story. The VPU is for diversification, but is currently too "expensive" for me. Dividend is one factor for VPU in a tax advantaged account - the current yield is one indication to me that it is over my price target, but I would not expect it to pay a 5% yield.