Search for Yield Drives Utilities Higher

Investors went in search of yield in November and December, driving utility stocks higher in the process.

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The Utilities Select Sector SPDR Fund (XLU) is up over 12% since the beginning of November compared to an 8% gain for the SPDR S&P 500 Fund (SPY) over the same time period.

One of the attractions of the utilties sector is the dividend yield.  Even with recent gains, XLU’s dividend yield remains above 4%.  With an average market cap of $16 billion and projected EPS growth of 3 – 5%, utilities are drawing investors who want to generate near term income while remaining in a relatively less risky place in the investing spectrum.

XLU’s top holdings include Exelon CorpSouthern CompanyDominion Resources and FPL Group and the fund’s expense ratio is 0.21%.

For more ETF investing choices, see the ETF Directory for a complete list of Sector ETFs.