|Bid||54.28 x 900|
|Ask||54.29 x 4000|
|Day's Range||54.12 - 54.56|
|52 Week Range||47.37 - 57.23|
|PE Ratio (TTM)||8.95|
|Expense Ratio (net)||0.14%|
CNBC's Dom Chu reports on the Vaneck Vectors Semi ETF as it tries to bounce back along with other ETFs that are not economically sensitive.
Let’s take a look at utility stocks (XLU) with attractive upside potentials for the next 12 months. PG&E (PCG) stock has a median target price of $51.9—compared to its current market price of $47.0, which indicates an upside potential of more than 10% for the next year.
NextEra Energy (NEE), the biggest component of the Utilities ETF (XLU), is trading at an EV-to-EBITDA multiple of ~16x—higher than its five-year average valuation. Duke Energy (DUK) is trading at an EV-to-EBITDA multiple of 11.0x. Southern Company (SO) stock is trading at an EV-to-EBITDA multiple of 10.8x—lower than its five-year average.
Broader utilities have risen more than 10% in the last three months. Currently, the Utilities Select Sector SPDR ETF (XLU) is trading at $54.3—almost 2% and 6% above its 50-day and 200-day moving averages. XLU’s fair premium to both of these support levels underlines the strength in XLU. These moving averages around $53.23 and $51.24 are expected to act as supports for XLU in the near future.
At large, utilities underperformed broader markets last week. The Utilities Select Sector SPDR ETF (XLU), a representative of the S&P 500 Utilities, rose 0.4%. Broader markets continued to increase and rose more than 1% for the week ending September 14. Despite the Fed’s aggressive stance about the rate hike this year, utilities—one of the most vulnerable sectors to rate hikes—showed strong growth in the last few months due to trade war concerns.
Amid the competitive threat from cleaner solar energy, many traditional utilities companies across the U.S. are getting in on the solar boom. Recently, Morgan Stanley has upgraded the utilities sector to Outperform, arguing that stock prices aren’t keeping pace with earnings growth so far in 2018, which suggests the market participants may be subtly pricing in slowing earnings growth down the line. Interestingly, the increased solar installations are not helping the Invesco Solar ETF (NYSEArca: TAN) , the largest ETF dedicated to solar stocks.
Currently, Southern Company (SO) stock offers an upside potential of ~4.0% from its current level of ~$44.19. Analysts gave Southern Company a median target price of $45.92.
Southern Company (SO) is the highest-yielding stock among the top utilities. Currently, Southern Company is trading at a dividend yield of 5.4%, while the Utilities Select Sector SPDR ETF (XLU) offers a yield of 3.3%. Southern Company increased its dividend per share 3.4% in 2018—compared to 2017.
Southern Company (SO) stock has fallen almost 10% in the last five weeks after management reported a project cost increase at Plant Vogtle. Let’s take a look at Southern Company’s valuation. Southern Company stock is trading at a trailing PE multiple of 21.6x, which is higher than its five-year historical average. In comparison, Duke Energy (DUK) is trading at a PE multiple of 21.5x, while NextEra Energy (NEE) is trading at 14x.
Southern Company (SO), one of the largest regulated utilities, continues to trade weak despite the recent strength in utilities at large. Southern Company stock has lost almost 8%, while the Utilities Select Sector SPDR ETF (XLU) has risen ~4% in 2018.
U.S. stocks ended the session slightly higher Wednesday as gains in consumer-staples but weakness in the technology and internet-related sector capped more significant advances, even as Wall Street digested midday reports that the U.S. and China may enter a fresh round of trade negotiations. The Dow Jones Industrial Average finished up 0.1% at 25,999, the S&P 500 gained less than 0.1% at 2,889, supported by a 1.3% rise in the consumer-staples sector. However, a 0.8% decline in financials and a 0.5% slide in tech names capped the broad-market benchmark's climb. Meanwhile, the Nasdaq Composite Index fell 0.2% at 7,954, as declines in the shares of chip makers weighed on the tech sector. A popular gauge of chip makers, the iShares PHLX Semiconductor ETF , ended down 1.1%, led by declines in shares of Micron Technology Inc. . Meanwhile, shares of Apple Inc. declined 1.2%, even as the gadget maker rolled out updates to its iPhones and Apple Watches. On the trade front, the U.S. has reached out to China for follow-up talks after negotiations last month concluded without results, according to The Wall Street Journal on Wednesday. In the latest economic data, the wholesale cost of U.S. goods and services fell in August for the first time in a year and a half as the recent upturn in inflation appeared to ease.The U.S. economy grew at a "moderate pace" even though there were pockets of weaker activity in certain districts, according to the latest Beige Book released.
Among the largest utilities by market cap, NextEra Energy (NEE), the biggest constituent of the Utilities Select Sector SPDR ETF (XLU), has rallied more than 11% so far this year, outperforming utilities on the whole. NextEra Energy’s superior earnings and dividend growth are some of the factors that differentiate it from its peers. To learn how top utility stocks performed this year and how they seem positioned going forward, read How the Big Utilities Are Placed for the Future.
The Utilities Select Sector SPDR ETF (XLU) is currently trading at $54.37, almost 2% and 6% higher than its 50-day and 200-day moving averages of $53.10 and $51.26, respectively. The ETF’s fair premium to both these support levels indicates its strength. These moving averages are expected to act as supports for XLU in the near future.
On the whole, utilities continued their upward march and rose more than 1% in the week that ended on September 7. Broader markets fell almost 1% during the week. Investor jitters and trade war fears have been the main drivers of the rally in utilities over the last few months.
In this part, we’ll look at factors that could drive Xcel Energy’s (XEL) dividends in the future. As we already noted, it’s aiming for EPS and dividend growth of ~6.0% per year for the next few years.
Among the top utilities, Southern Company (SO) stock offers the highest potential upside of more than 5% for the next 12 months. Wall Street analysts have given it a median price target of $45.97 against its current market price of $43.90.
Stocks closed lower Friday on new tariff threats and a new inflation fear, but leading stocks generally outperformed.
In this part, let’s take a look at Xcel Energy’s (XEL) payout ratio. Xcel Energy has had a payout ratio of 63.0% for the last 12 months, marginally higher than its five-year average payout ratio. A company’s payout ratio denotes how much of its income it distributes to shareholders in the form of dividends.
Xcel Energy’s (XEL) EPS has increased at a CAGR (compound annual growth rate) of 6.0% in the last decade or so. It derives almost all its earnings from regulated operations, leading to stable earnings and dividends. Xcel Energy’s management expects its EPS and dividends to grow at similar levels for the next few years, marginally higher than that of utilities (XLU) at large.
Renewables titan NextEra Energy (NEE), the largest constituent of the Utilities Select Sector SPDR ETF (XLU), is currently trading at a PE multiple of ~14x. That’s much lower than its five-year average valuation. It thus appears to be trading at a discounted valuation. NextEra Energy is the top rallied stock among the top utilities so far this year. The second-largest utility by market cap, Duke Energy (DUK), is trading at a PE multiple of 21.0x, which is higher than its historical average.
To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.
Xcel Energy (XEL), one of the leading rate-regulated utilities, declared a quarterly dividend of $0.38 per share on August 22. Xcel Energy is expected to pay an annualized dividend of $1.52 per share this year, which is ~6.0% higher than last year’s dividends. Xcel Energy (XEL) is currently trading at a dividend yield of 3.2%, close to the broader utilities’ average dividend yield.
On September 4, the Utilities Select Sector SPDR ETF (XLU) had an implied volatility of 12%, which is close to its 15-day average. The SPDR S&P 500’s implied volatility was 9%. The implied volatility represents investors’ anxiety. An increase in volatility is generally related to a fall in stock prices. The implied volatility of Southern Company (SO) and Dominion Energy (D) was ~14%. Duke Energy (DUK) and NextEra Energy (NEE) displayed a volatility close to those levels.
Among the utility giants, Southern Company (SO) offers the highest dividend yield of 5.4% against the peer average of 3.3%. The largest of them all, NextEra Energy (NEE), yields 2.6%, the lowest among the S&P 500 Utilities (XLU). Duke Energy (DUK) and Dominion Energy (D) yield 4.6% each.
Since interest rates in the United States are rising, analyzing utilities’ (XLU) leverages is vital. As of June 30, Southern Company (SO) had a net debt of $47 billion. In comparison, Duke Energy (DUK) and Dominion Energy (D) had net debts of $55.7 billion and $37.6 billion, respectively, at the end of Q2 2018. NextEra Energy (NEE), the largest utility, currently has a net debt of $32 billion, the lowest of the four top utilities.