6 High Yielders That Are Going on Sale

These utility stocks are on the wrong side of some backbreaking fundamental and technical forces. But there is a silver lining.

While popular momentum favorites like biotechnology and big-tech stocks get all the attention, many regular investors are focused instead on dividend-rich areas of the market — think master limited partnerships, real estate investment trusts and utility stocks — for their dividend yields and (relative) stability.

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Unfortunately, valuations have been wiped out here over the past three weeks while U.S. Treasury yields have been pushing higher. On the surface, this is curious: Odds of a September interest rate hike from the Federal Reserve have been dropping amid market turmoil.

The working thesis is that the Chinese are responsible, liquidating T-bond positions to raise dollars needed to stabilize their currency. Also, over the past week bond market inflation expectations have been on the rise — ostensibly because traders are increasingly pricing in a continuation of 0% interest rates possibly into 2016.

In response, here are six utility stocks with yields between 3.5% and 5.5% that are under heavy pressure, at risk of falling under multiyear support levels (if they haven’t already).

For opportunistic investors, this could spell a chance at even better prices and higher yields on cost.

Utility Stocks on Sale: American Electric Power (AEP)

Utility Stocks on Sale: American Electric Power (AEP)

Dividend Yield: 4%

American Electric Power (AEP) shares have dropped nearly 11% from their July high on the lift in long-term yields.

A drop below the $52.50 level, marking support from June as well as the resistance level of last summer, would put lows near $47.50 in play. That would have shares yielding roughly 4.5%.

Utility Stocks on Sale: CenterPoint Energy (CNP)

Utility Stocks on Sale: CenterPoint Energy (CNP)

Dividend Yield: 5.5%

CenterPoint Energy (CNP) has suffered a near 12% decline since the middle of August, continuing a decline that started in late 2014.

Shares are down more than 27% over this time, and CNP’s important moving averages are far, far overhead.

Utility Stocks on Sale: Exelon (EXC)

Utility Stocks on Sale: Exelon (EXC)

EXC Dividend Yield: 4.1%

Exelon (EXC) has dropped more than 12% from its August high and is down more than 20% from its December 2014 high.

Shares are testing support from last summer’s lows. A breakdown could result in a drop all the way to the 2013-14 lows near $25, which would be worth a 17% decline from here. Shares at that point would yield close to 5%.

Utility Stocks on Sale: Public Service Enterprise (PEG)

Utility Stocks on Sale: Public Service Enterprise (PEG)

PEG Dividend Yield: 4%

Public Service Enterprise (PEG) carries a 4% dividend yield but has dropped more than 11% from its August high as it falls to test the bottom of its year-long trading range.

A violation would likely put the 2014 trading range mid-point near $36 in play — a nearly 8% drop from here that would push the yield to 4.3%.

Utility Stocks on Sale: Southern Co. (SO)

Utility Stocks on Sale: Southern Co. (SO)

SO Dividend Yield: 5.1%

Southern Company (SO) carries a 4.9% dividend yield but has fallen back into the midst of its year-long trading range after reversing a short-lived spike over the summer. Shares are down nearly 10% from their recent highs and are down more than 17% from their January high.

There seems to be solid support near $42 — going all the way back to 2012 — but a breakdown would put 2012-2014 lows near $37 in play for a drop of nearly 12% from here, pushing yields up to 5.8%.

Utility Stocks on Sale: AES Corp. (AES)

Utility Stocks on Sale: AES Corp. (AES)

AES Dividend Yield: 3.5%

AES Corp. (AES) has suffered a nearly 20% price decline since June to fall below its early 2015 lows.

A drop below $11 would complete a potential rounding top pattern dating back to 2013 and put late 2012 lows near $9.50 in play, which would bump yields up to 4.2%.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/6-high-yield-utility-stocks-sale/.

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