Nevertheless, the utilities sector provides investors with a defensive position, as the sector has the lowest beta – only 0.5 – of any of the S&P economic sectors. Additionally, the sector offers yields of around 3.5%, whereas the yields on benchmark 10-year Treasury notes still hover around 1.5%. [Utilities ETFs Can be a Market ‘Tell’]
“Absent a major correction of the broader market – under which scenario utilities would probably outperform given their low beta – we believe utilities are likely to continue to trail the market, even in a slow growth environment,” Koesterich said.
Instead, investors may consider diversified funds with some exposure to U.S. utilities to spread out the risk:
- iShares High Dividend Equity ETF (NYSEArca: HDV): 2.83% yield.
- iShares Dow Jones EPAC Select Dividend ETF (NYSEArca: IDV): 5.3% yield.
- iShares Emerging Markets Dividend ETF (NYSEArca: DVYE): 6.21% 30-day SEC yield.
For more information on dividends, visit our dividend ETFs category.
Max Chen contributed to this article.