Some have looked to high dividend-paying stocks like master limited partnerships in a prolonged low-yield environment, but utilities may still maintain an amount of certainty for investors.
Rhame pointed out that over the past seven years, utilities have consistently outperformed MLPs and have done so with much lower levels of volatility, which is important to income-oriented investors.
Tax Laws Pose Greater Risk to MLPs Than Utilities
Furthermore, ss shown by last week’s FERC ruling, actual and potential changes to tax laws pose a much greater risk to MLPs than to utilities, Rhame added.
“Investors can find income and growth opportunities in utilities, especially under the guidance of expert managers,” Rhame said. “UTES, the first and only actively managed utilities ETF, has outperformed the S&P Utilities Sector SPDR Fund (XLU) by more than 450 basis points since its inception in September 2015. We take advantage of both regulatory and regional variances by overweighting utilities in areas with relatively better population growth, weather, and industrial activity.
For more information on the utilities sector, visit our utilities category.