The Speculative Look of Utility Stocks

Spurned by the Federal Reserve’s interest rate policy that has pushed the 10-year Treasury note yield below 2 percent, income seekers are enjoying a rebound relationship with utility stocks flashing come-hither 4 percent or so average yields.

Mutual fund and exchange-traded fund assets in the utility sector increased more than 30 percent in the 12 months through July, according to Morningstar. Not only did investors pocket a bond-beating yield, the sector’s total return for the year (yield plus capital gains on the underlying stocks) was nearly 20 percent for the classic defensive group. It all sounds so promising. Yet investment pros warn the lovefest with utility stocks could be headed for rocky times.