Amid the chaos buffeting markets in recent months, there’s one sector that’s outperforming the rest: power companies. Generally boring, mostly reliable, utility stocks have done so well this year that the group is officially the best-performing industry of 2016 so far. While the S&P 500 has sunk by 8%, the S&P Utilities Index was up by almost 7.5% for the year as of February, and the narrower Dow Jones Utilities Average was up by 8.4%.
Why the surge? It’s partly a correction from the clobbering the stocks took last year (investors credit anxiety over interest rate hikes for the drop). “They are getting back to where they belong,” says Morningstar utilities analyst Charles Fishman. “Now, they are fairly priced.”
Utilities also have particular appeal in times of uncertainty. The promise of consistent dividend yields and regulated environments at the state-level presents a solid ground for investors looking to withstand the early uncertainty. “It’s a defense play,” said Fishman. Unlike other businesses, power never goes out of style (and neither, it turns out, do dividends).
A version of this article appears in the March 1, 2016 issue of Coins2Day with the headline “And the Best-Performing Industry of the Year So Far Is…Utilities?”.