After the recent surge in the utilities space, XLU is now showing a price-to-earnings ratio of 18.8 and a price-to-book of 1.8, according to Morningstar data. In comparison, the S&P 500 index has a 18.0 P/E and a 2.5 P/B. [Utilities ETFs Look Pricey]
With any market observers are expecting the Federal Reserve to raise interest rates this year, dividend growth stocks and ETFs could offer an advantage.
“Dividend yields have been an important driver of sector returns as investors have searched for yield, but dividends will become less important as interest rates slowly normalize. Investors will be well-advised to select sectors with a positive correlation to Treasury yields, and avoid sectors that investors have piled into looking for income,” notes J.P. Morgan.
The consumer discretionary sector has a 0.06 correlation to Treasury yields compared to -0.5 for utilities, according to J.P. Morgan data. Additionally, discretionary is expected to be one of just two sectors to show double-digit dividend growth this year. Financial services is the other. [The Growth of Dividend ETFs]
Consumer Discretionary Select Sector SPDR
