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Friday, October 8, 2021

7 Best Utilities Sector Dividend Stocks

Today’s article concludes my article series identifying high-quality stocks in each GICS sector

My watchlist of dividend growth stocks is Dividend Radar, a list of stocks trading on U.S. Exchanges with dividend increase streaks of five or more years. Dividend Radar is a free resource for dividend growth investors, maintained and published every Friday by Portfolio Insight. The latest edition (dated October 1, 2021) contains 744 stocks, of which 58 fall in the Utilities sector.

I use DVK Quality Snapshots to assess the quality of dividend growth stocks, assigning 0-5 points to each stock based on how they rate on five widely-used quality indicators. The total of these points is a stock’s quality score out of a maximum of 25 points. I rank stocks by sorting them in descending order of quality score. When stocks have the same quality score, I use tie-breaking metrics to rank them. 

This article presents the seven top-ranked stocks in the Utilities sector.

The Utilities sector comprises utility companies such as electric, gas, and water utilities. It also includes independent power producers, energy traders, and companies that engage in generating and distributing electricity from renewable sources.

The Utilities sector usually performs better than other GICS sectors when concerns about slowing economic activity surface. People need water, gas, and electricity during all phases of the business cycle! Additionally, lower interest rates that coincide with a weak economy provide cheaper funding for the large capital expenditures required by many companies in this sector.

To see the seven top-ranked dividend growth stocks in the Utilities sector, read this article at TheStreet.com. Four stocks trade below my Buy Below prices, and I highlight a few for further research and possible investment. 

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  1. What do you percentage do you recommend to allocate to each sector for a dividend growth portfolio like yours?

    1. I have no specific recommendation about sector distribution. It really depends on your own situation. For me, I'm a few years from retirement and I'm looking to increase my Defensive exposure. That's not necessarily suitable for younger investors with many more years in accumulation.

    2. What percentage in defensive should a 30 year old aim for?

    3. It depends on your risk tolerance. Again, I don't want to make specific recommendations. Every person's situation is different. Questions to ask yourself are:
      (1) "How would I feel if the market drops 40% and I see my portfolio go down that much?" (Normally, Defensive sector stocks drop less in a market crash).
      (2) "How would I feel if the market continues its bullish ways and I see my portfolio lag that pace?" (Normally, Defensive sectors stocks do not grow as fast in a bull market).


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