FactSet projects the utilities sector is expected to experience earnings growth of 4.4% in 2016. Consequently, analysts warned that the lofty prices may not be supported by robust earnings growth.
No sector is as negatively correlated to rising interest rates as utilities, meaning the longer the Fed resists raising interest rates, the longer high-yielding utilities stocks and ETFs remain compelling destinations for yield-starved investors.
“The bottom line is that some stocks in the higher-yielding sectors might now be cheap enough from a charting perspective for investors to do some nibbling. The Fed’s rate hikes still loom, but there now seems to be enough optimism in the market to overcome that drag,” according to Barron’s.
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