It took a while, but utility stocks are finally starting to pop. They still look appealing even after a recent gain.
What has changed lately is that bond yields have come down. The yield on 10-year Treasury debt was at 4.59% on Tuesday afternoon, compared with nearly 5% in late October, adding to the appeal of dividend stocks. First, the 10-year Treasury yield could keep falling. At about 4.6%, the 10-year note is still yielding more than 2 percentage points above the expected average annual rate of inflation for the next 10 years. That additional yield, near the high end of the range since the 2008-2009 financial crisis, still looks appealing, which should bring in more buyers.Not only are the stocks relatively inexpensive, earnings are growing, so investors have a reason to hold them for the long term.
That would lift earnings per share by almost 10% annually from the end of this year through 2027, FactSet data indicate.
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