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Total Returns Matter
Utility stocks are a favorite among income investors.
Many websites and YouTube channels showcase utility companies as a great source of passive income. This is due to the sector’s stable nature and higher-than-average dividend yields.
And while most utility companies are safe and do offer decent cash flow, it’s also important to look at their total returns.
Which is where things start to get disappointing.
The majority of popular utility companies have a 10 year average annual total return below the S&P 500. And that’s with those high starting dividend yields getting reinvested for maximum performance.
The Vanguard S&P 500 ETF returned a 13.32% average annual total return over the past 10 years.
Here’s how some of the most popular utility stocks preformed:
- Fortis ($FTS) — 6.35%
- Dominion Energy ($D) — 8.79%
- Consolidated Edison ($ED) — 8.96%
- Exelon Corporation ($EXC) — 9.54%
- The Southern Company — 10.47%
The Vanguard Utilities ETF ($VPU) fared better at 11.29% average annual 10 year total return. But it still underperformed the broad market.
