Monday, May 2, 2022

Utility yields premium is dissipating

Inflation has started to erode the competitiveness of the utilities sector's dividends. For the first time in at least 30 years, utilities' inflation-adjusted dividend yield has turned negative.

While yields are still attractive at a median of 3.1% compared with the rest of the market, the sector’s yield premium is dissipating. Utility yields had as much as a 200-basis-point premium to the 10-year U.S. Treasury in August 2021. That has fallen to 29 basis points as of April 28, the smallest since November 2018.

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