While utility exchange traded funds (ETFs) didn’t exactly light the markets on fire last year, they still have serious appeal in the form of high dividend yields.
In 2009, utility ETFs were the weakest performers among the 21 U.S.-stock categories that Morningstar tracks, says Dale Buss for The Wall Street Journal. The average return was 18%, while the S&P gained more than 26%.
While the sector may underperform for some time, if analysts are correct, utility ETFs are hugely attractive to conservative investors looking for high yields. As of late December, the median yield of 26 funds was 2.9%. The median yield for large-cap blend funds was 1.2%. [Utility ETFs as energy proxies.]
Meanwhile, Google (NYSE: GOOG) wants to further extend its reach. The search engine behemoth has begun to seek regulatory approval from the Federal Energy Regulatory Commission to become an electricity marketer, essentially giving it the authority to buy and sell bulk power at market prices, just the way large utilities and energy traders do. [Will this move help utility companies rebound?]
The company made the request through its Google Energy LLC subsidiary, and claims that this move will help it better manage supplies for its own operations and give it greater access to renewable energy sources, reports Rebecca Smith and Jessica Vascellero for The Wall Street Journal. [A utility investment is a good defense for a portfolio.]
The move offers an indication of just how much electricity large tech firms now consume in order to run their sprawling networks of servers and mainframes. It is common for large centers run by Internet companies to consume 30 to 50 megawatts of energy capacity, says an insider. Based on an estimate of 24 large data centers, Google’s energy need would be roughly equivalent to the output of two large conventional power plants.
For more stories about utility ETFs, visit our utility category.
- Select Sector SPDR Utilities (NYSEArca: XLU)
- iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
- iShares S&P Global Utilities (NYSEArca: JXI)