UTG - UTG: Collecting A High Yield From Utilities Slump

2024-05-05 08:51:10 ET

Summary

• The utilities sector has underperformed the market due to rising interest rates, but high dividend income can offset underperformance.
• Reaves Utility Income Trust (UTG) sits at a slight discount to NAV. In addition, the fund's tax advantaged distribution makes it attractive for income investors.
• UTG's fund strategy focuses on dividend-paying stocks in the utilities sector, with a diverse breakdown of holdings.
• The current dividend yield is 8.6% and distributions are issued on a monthly basis.

Overview

The utilities sector continues to lag behind the rest of the market since the rapid rising of interest rates in 2022. For example, the utilities sector ( XLU ) has delivered a modest 18% price gain over the last 5 year period. In comparison, the S&P 500 ( SPY ) has grown in price by over 75% through the same time frame. I believe that receiving a high dividend income even though price movement may disappoint, may help offset this underperformance and make it easier to hold through unfavorable market conditions....

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