Utilities – a staple of retirees' portfolios for their steady dividends – are emerging as a hot corner of the market in 2024, and UBS is highlighting the group as a "most preferred" sector in August. Publicly-traded utility stocks have surged nearly 19% in 2024, behind only information technology and communications services as investors look to utilities as another way to play the artificial intelligence trend. What's more, their dividend yields will grow more attractive if Treasury yields fall, and their borrowing costs will grow less burdensome if the Fed cuts interest rates, as is widely expected.
.GSPU YTD mountain The S & P 500 Utilities Sector in 2024 In the third quarter, utilities have stood out, climbing 10%, through Friday. That compares to a 0.
5% advance from tech and a decline of more than 2% for communications services. Electricity demand is expected to grow as much as 20% by 2030, with AI data centers adding an estimated 323 terawatt hours of power demand by then, according to an April analysis from Wells Fargo. To play the trend, UBS strategist James Dobson called out NextEra Energy as a "top pick" among utilities, according to a report last week from the bank's Chief Investment Office, Global Wealth Management.
Shares of NextEra, parent of Florida Power & Light and NextEra Energy Resources, are up 31% in 2024 and yield 2.6%. "With distinct competitive advantages in renewable development in the U.
S. and an attractive valuation, we believe NEE can outperform.