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On Jul 31, the Federal Reserve announced a 25-basis point rate cut, which was far below investors' expectations. Further, the Fed Chair referred to the reduction as a “midcycle adjustment.” Investors expecting a wider rate cut and assuming this was the beginning of a rate cut cycle were disappointed.
Consequently, all major indexes closed in the red. Stocks fell further on Aug 1, with President Trump announcing plans to impose a 10% tariff on $300 billion of Chinese products.
Major indexes have been facing turbulence since May 2019 due to the trade war between the United States and China. On Aug 1, Trump’s statement worsened matters as shares of giants dependent on China for international trade fell sharply. Apple Inc. (AAPL - Free Report) shares fell by 2.2%, global traders Caterpillar Inc. (CAT - Free Report) and Deere & Company’s (DE - Free Report) shares fell 3.7% and 2.7%, respectively.
With China lowering its currency value and Trump standing firm on his plans of raising tariffs, both companies and investors are suffering. This is why it makes sense to invest in safe-haven options like utility stocks.
Utility Stocks Look Attractive
Since markets are passing through difficult times, investors are turning more and more risk averse with every passing day. This is why they are increasingly considering safe-haven options such as utility stocks. They offer steady dividends and are less susceptible to market gyrations even during volatile trading.
Utility stocks benefit from a low-interest-rate environment as they have a disproportionally large debt component. Hence, they can provide a higher dividend to shareholders even in the low-rate environment because their debt servicing burden goes down. In fact, utilities provide a cushion to most portfolios during a period of high market volatility and a slowing economy.
The latest reports from the U.S. Commerce Department shows that the GDP hit the pace of 2.1% in the second quarter, which is much below the first-quarter rate of 3.1%. In fact, as per reports of the Department of Labor the nonfarm payroll numbers for July is 164,000 jobs compared to 165,000 in June. Hence, decrease in key economic statistics is clearly visible, pointing toward a slowing economy.
5 Winning Stocks
Following signs of a weak economy, low interest rate cut expectation and intensifying trade war between the United States and China, the market has turned highly volatile. Utilities not only offer dividends but demand for their services remain largely unchanged during weak economic conditions.
Unitil Corporation (UTL - Free Report) is a publicly traded utility company that serves New Hampshire, MA, and Maine with electricity and natural gas. Unitil’s expected earnings growth for the current year is 4%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 30 days. The stock has a dividend yield of 2.5%.
Southwest Gas Holdings, Inc. ((SWX - Free Report) ) is an energy holding company based in Las Vegas, NV. The company’s expected earnings growth for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 90 days. The stock has a dividend yield of 2.5%.
Alliant Energy Corporation ((LNT - Free Report) ) is a public utility holding company that generates and distributes electricity, and distributes and transports natural gas in Iowa. The company’s expected earnings growth for the current year is 3.7%. The Zacks Consensus Estimate for current-year earnings has improved by 0.4% over the past 60 days. The stock has a dividend yield of 2.8%.
The York Water Company (YORW - Free Report) impounds, purifies and distributes water and is regulated by the Pennsylvania Public Utility Commission. The company’s expected earnings growth for the current year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 30 days. The stock has a dividend yield of 1.9%.
American States Water Company (AWR - Free Report) provides water service to customers in Northern, Coastal and Southern California. The company’s expected earnings growth for the current year is 18.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 30 days. The stock has a dividend yield of 1.3%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
Image: Bigstock
5 Utility Stocks You Should Buy Right Now
On Jul 31, the Federal Reserve announced a 25-basis point rate cut, which was far below investors' expectations. Further, the Fed Chair referred to the reduction as a “midcycle adjustment.” Investors expecting a wider rate cut and assuming this was the beginning of a rate cut cycle were disappointed.
Consequently, all major indexes closed in the red. Stocks fell further on Aug 1, with President Trump announcing plans to impose a 10% tariff on $300 billion of Chinese products.
Major indexes have been facing turbulence since May 2019 due to the trade war between the United States and China. On Aug 1, Trump’s statement worsened matters as shares of giants dependent on China for international trade fell sharply. Apple Inc. (AAPL - Free Report) shares fell by 2.2%, global traders Caterpillar Inc. (CAT - Free Report) and Deere & Company’s (DE - Free Report) shares fell 3.7% and 2.7%, respectively.
With China lowering its currency value and Trump standing firm on his plans of raising tariffs, both companies and investors are suffering. This is why it makes sense to invest in safe-haven options like utility stocks.
Utility Stocks Look Attractive
Since markets are passing through difficult times, investors are turning more and more risk averse with every passing day. This is why they are increasingly considering safe-haven options such as utility stocks. They offer steady dividends and are less susceptible to market gyrations even during volatile trading.
Utility stocks benefit from a low-interest-rate environment as they have a disproportionally large debt component. Hence, they can provide a higher dividend to shareholders even in the low-rate environment because their debt servicing burden goes down. In fact, utilities provide a cushion to most portfolios during a period of high market volatility and a slowing economy.
The latest reports from the U.S. Commerce Department shows that the GDP hit the pace of 2.1% in the second quarter, which is much below the first-quarter rate of 3.1%. In fact, as per reports of the Department of Labor the nonfarm payroll numbers for July is 164,000 jobs compared to 165,000 in June. Hence, decrease in key economic statistics is clearly visible, pointing toward a slowing economy.
5 Winning Stocks
Following signs of a weak economy, low interest rate cut expectation and intensifying trade war between the United States and China, the market has turned highly volatile. Utilities not only offer dividends but demand for their services remain largely unchanged during weak economic conditions.
We have narrowed down our search to a Zacks Rank #2 (Buy) and strong dividend yield. You can see the complete list of today’s Zacks #1 Rank stocks here.
Unitil Corporation (UTL - Free Report) is a publicly traded utility company that serves New Hampshire, MA, and Maine with electricity and natural gas. Unitil’s expected earnings growth for the current year is 4%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 30 days. The stock has a dividend yield of 2.5%.
Southwest Gas Holdings, Inc. ((SWX - Free Report) ) is an energy holding company based in Las Vegas, NV. The company’s expected earnings growth for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 90 days. The stock has a dividend yield of 2.5%.
Alliant Energy Corporation ((LNT - Free Report) ) is a public utility holding company that generates and distributes electricity, and distributes and transports natural gas in Iowa. The company’s expected earnings growth for the current year is 3.7%. The Zacks Consensus Estimate for current-year earnings has improved by 0.4% over the past 60 days. The stock has a dividend yield of 2.8%.
The York Water Company (YORW - Free Report) impounds, purifies and distributes water and is regulated by the Pennsylvania Public Utility Commission. The company’s expected earnings growth for the current year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 30 days. The stock has a dividend yield of 1.9%.
American States Water Company (AWR - Free Report) provides water service to customers in Northern, Coastal and Southern California. The company’s expected earnings growth for the current year is 18.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 30 days. The stock has a dividend yield of 1.3%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>