In an environment of low interest rates, high dividend values are on the rise on Wall Street and the search for yield should continue to make the utilities sector and, to a lesser extent than in telecoms the next few weeks
S & amp index;. P 500 sector “utilities”, the dividend yield at 3.9% is more than 100 basis points above the yield on the Treasury 10-year, led the gains in the American Stock Exchange on Friday as the yield on the lighthouse fell to a low of 14 months.
Since the beginning of the year, the sector index gained 8.8%, the third best performance in the market after those technologies and health. Telecoms have not done as well, with a gain of only 0.8% for ranked, but two values of the sector, Windstream and Frontier Communications Holdings, jumped over some 40% over the period.
As of June 30, utilities showed a gain of 16.4%, making it the best performing sector on Wall Street, after which profit taking has reduced its lead.
The utilities benefit at the same time their high dividends, a safe-haven in times of economic uncertainty and the ongoing favorable valuation, since their ratio price / performance is estimated at 14.9 against 15.2 for the S & amp;. P-500, according to Thomson Reuters data
According to analysts, this favorable combination should last
“The 10-year-old American provides a return. attractive given the context of very low yields elsewhere. This reinforces the attractiveness of sectors with high dividend and it’s a bit what makes ‘the’ on the market, “said Quincy Krosby, strategist at Prudential Financial Newark, New Jersey.
“NO ALTERNATIVE”
The geopolitical tensions in the world, particularly in Ukraine, have increased the demand for sovereign bonds deemed safe and which are also supported by the asset purchases made by the Federal Reserve, although its quantitative easing program comes to an end.
The utilities sector index jumped 2% Friday its biggest percentage gain since June, after the week flirting with the technical definition of a correction since lost nearly 10% from its highs of June 30
The decline bond yields also benefits trackers (ETFs, exchange-traded funds) that replicate values as high dividend ETF “Powershares Dividend Achiever”, which was awarded on Friday to 1.3% up 3.2% since the beginning of the year.
The ETF First Trust Morningstar Dividend Leaders did even better, gaining 1.2% on Friday to bring her up to 6% since January 1.
S & amp index, P telecom offers a dividend even higher than the utilities, 4.7%, but with a smaller sample values. The sector has lagged this year due to mixed performance from its two main representatives, AT &. T and Verizon
But Windstream Holdings, which specializes in communications networks, offers a yield of 9% , the highest S & amp; P-500, and Frontier Communications is the third in a yield of 6.2% according to data from Thomson Reuters. It’s more than the average S & amp; P + 2.4% – and that explains their respective gains of 40% and 37% since January 1
“It is to these values. of return that investors will continue to look because there is currently no alternative, “predicted Mark Luschini, Janney Montgomery Scott strategist at Philadelphia.
(Veronique Tison for the French service)
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