The utilities sector has been red-hot in 2011. You might think this is absurd since utility stocks are quite boring investments. It’s not like a power company in Florida is going to see its profit double from quarter to quarter — unless rates double or the number of citizens increases dramatically overnight. They are legalized monopolies that largely plod along and pay dividends, but not much more. But it’s this very stable nature of the utility sector that has brought in buying pressure from risk-averse investors.
Take the Utilities SPDR ETF (NYSE:XLU), which is up 7% so far in 2011, compared with a 2% slide for the broader market. The icing on the cake is that XLU pays a 4% dividend because of its many cash-rich and high-yield holdings that include The Southern Company (NYSE:SO), Exelon (NYSE:EXC) and Dominion Resources (NYSE:D).
Big demand for utility stocks in this troubled market environment means big gains for XLU and other utility ETFs. The great dividend yield also is a selling point.