Utilities have been a focus for income-oriented investors over the last several years due to robust current dividend yields in a low interest rate environment. However, rising interest rates threaten the ongoing viability of this approach, especially with many utilities trading at historically high price-to-earnings ratios.
However, rising interest rates may actually benefit another sector - banking and financials - which in many ways are arguably similar to utilities in terms of risk profile yet many of which have far more modest valuations, similar (or better) incremental earnings growth opportunities, and well-protected dividend yields.
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