Lately, utilities proved more resilient than industrials, financials


In 2000, Berkshire Hathaway (BRK) entered into a new industry when it invested $1.7 billion to acquire MidAmerican Energy (MEC), an electric utility based in Iowa with operations in the United States and the United Kingdom. “Though there are many regulatory constraints in the utility industry, it’s possible that we will make additional commitments in the field. If we do, the amounts involved could be large,” said at the time BRK’s CEO and Omaha-based legendary investor Warren Buffett.

Mostly considered a low risk investment though capital-intensive, the utility sector encompasses stocks from electric, water, gas and power providers. Despite some continuous uncertainty over the cost of infrastructure and raw materials, utility stocks are widely seen as reliable as bonds but more rewarding since they pay a dividend yield of 3.5 percent, clearly above the yield of the S&P 500 at 2.11 percent and the U.S. 10-year Treasury note at 2.7 percent as of December 28, 2018.

Since the market’s recent entry into bear territory, consulting firm Cyceon noticed that the utility sector has shown more resilience so far than most other sectors including health care, financials and industrials.

Indeed, utility companies like Connecticut Water Service (CTWS), Atmos Energy (ATO), Northwest Natural Gas (NWN) are respectively down 4.05 percent, 7.46 percent and 12.86 percent from their historical highs*. In the meantime, industrial company ABM Industries Inc. (ABM), financial company Eaton Vance Corp. (EV) and health care distributor Cardinal Health (CAH) are respectively down 30.92 percent, 40.38 percent and 50.65 percent from their historical highs.

Multi-utilities companies however might be a bit more scattered than their specialized counterparts, for instance MDU Resources (MDU) is 34.20 percent away from its top, contrasting with Vectren Corp. (VVC) which is just 0.18% away. All the companies cited above belong either to the dividend aristocrats category or to the dividend champions category meaning that they are all longstanding companies with stable dividend distribution and growth policy.

* Most of historical highs here have been considered since 2007.