9 Low Beta Utility Stocks Yielding Over 4%

Includes: DUK, ED, LNT, PCG, PPL, SO, VVC, XEL
by: Parsimony Investment Research
The U.S. economy continues to have significant headwinds (e.g., high unemployment, end of QE2, weak housing market, etc.) and the looming debt ceiling deadline has certainly enhanced investor uncertainty.
In the current market environment, it is important for income investors to choose their dividend stocks wisely as they are putting new money to work. As volatility increases (especially downside volatility), investors may want to add some low beta stocks to their holdings to help dampen portfolio volatility. In general, companies with low betas will tend to be less volatile than the general market.
In general, Utility stocks hold up very well in a stagnating economy. In addition, since most utility stocks tend to operate with relatively high debt levels, a low interest rate environment is ideal for these stocks.
With that in mind, we did a screen with the following parameters to find low beta utility stocks with stable dividend yields:
  • Sector: Utilities
  • Dividend Yield > 4%
  • Stock Price > $10.00
  • Market Cap > $1 billion
  • P/E Ratio < 20.0x
  • Beta < 0.50
The stocks below meet the parameters above. Use this data as a starting point for your own analysis.

On average, the stocks above have a beta of 0.37 and a yield of 4.6%, a great combination for times of uncertainty. Since we feel that the market is due for a decent pullback, we also recommend that investors consider selling covered calls on these stocks to further dampen portfolio volatility (see Double Your Dividend Yield: A Covered Call Strategy for Income Investors for details).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.