5 Utility Stocks You Should Buy Right Now
Zacks Investment Research | Aug 12, 2019 07:06AM ET
On Jul 31, the Federal Reserve announced a 25-basis point rate cut, which was far below investors' expectations. Further, the Fed Chair referred to the reduction as a “midcycle adjustment.” Investors expecting a wider rate cut and assuming this was the beginning of a rate cut cycle were disappointed.
Consequently, all major indexes closed in the red. Stocks fell further on Aug 1, with President Trump announcing plans to impose a 10% tariff on $300 billion of Chinese products.
Major indexes have been facing turbulence since May 2019 due to the trade war between the United States and China. On Aug 1, Trump’s statement worsened matters as shares of giants dependent on China for international trade fell sharply. Apple Inc. (NASDAQ:AAPL) shares fell by 2.2%, global traders Caterpillar Inc. (NYSE:CAT) and Deere & Company’s (NYSE:DE) shares fell 3.7% and 2.7%, respectively.
With China lowering its currency value and Trump standing firm on his plans of raising tariffs, both companies and investors are suffering. This is why it makes sense to invest in safe-haven options like utility stocks.
Utility Stocks Look Attractive
Since markets are passing through difficult times, investors are turning more and more risk averse with every passing day. This is why they are increasingly considering safe-haven options such as utility stocks. They offer steady dividends and are less susceptible to market gyrations even during volatile trading.
Utility stocks benefit from a low-interest-rate environment as they have a disproportionally large debt component. Hence, they can provide a higher dividend to shareholders even in the low-rate environment because their debt servicing burden goes down. In fact, utilities provide a cushion to most portfolios during a period of high market volatility and a slowing economy.
The latest reports from the U.S. Commerce Department shows that the GDP hit the pace of 2.1% in the second quarter, which is much below the first-quarter rate of 3.1%. In fact, as per reports of the Department of Labor the nonfarm payroll numbers for July is 164,000 jobs compared to 165,000 in June. Hence, decrease in key economic statistics is clearly visible, pointing toward a slowing economy.
5 Winning Stocks
Following signs of a weak economy, low interest rate cut expectation and intensifying trade war between the United States and China, the market has turned highly volatile. Utilities not only offer dividends but demand for their services remain largely unchanged during weak economic conditions.
We have narrowed down our search to a Zacks Rank #2 (Buy) and strong dividend yield. You can see Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.