These five utility stocks to buy should be able to rally so long as inflation remains checked
Utility stocks were supposed to be yesterday’s favorite
investment. The theory regarding utility stocks was simple: Robust economic
growth coupled with a full labor market was supposed to spark rising inflation.
The Fed was supposed to fight rising inflation with rate hikes. Fixed income
yields were supposed to rise. Utility stocks, which were long viewed as bond
substitutes in an era of ultra-low interest rates, were supposed to fall.
But that theory hasn’t fully materialized into reality.
The result? Utility stocks haven’t lost their shine. With
inflation relatively contained and investors ducking into safety, stocks in
utilities are still attractive assets to own for dividend yield hunters.
Utilities Select Sector SPDR Fund(NYSE: XLU), a utilities ETF, has jumped 13.5% in 2019.
The markets’ recent volatility has contributed to the XLU’s
gain, as investors flee toward any safe haven. Not to mention, a number of
other catalysts are in play. Inflation isn’t soaring higher because technology
giants are suppressing inflationary pressures (just think about the downward
pressure Amazon (NASDAQ:AMZN) is putting on all consumer goods prices). This
trend won’t reverse any time soon, and thus, inflationary pressures should
remain subdued for the foreseeable future. With those forces subdued, utility
stocks have room to rally.
With that said, what are the best utility stocks to buy for
your portfolio? Here’s a list of five stocks that I think are worth a look:
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