The stock market over the last couple of months has been manic to say the least as the broad-based indices are near unchanged for the year, but several sectors have moved into correction territory. One segment of the market that has held strong and outperformed has been the old-school dividend stocks.
The Dow Jones Utility Average came within five points of a new all-time last week and the MSCI U.S. REIT Index is breaking out to a new nine-month high. The two sectors are considered “boring”, but with a decent dividend yield and bullish charts they cannot be ignored.
The SPDR Utilities Sector ETF (NYSE: XLU) is a basket of 30 stocks that is currently paying a 3.5 percent dividend yield. A little over half of the portfolio is composed of electric utilities with the remainder made up of what are termed multi-utilities. Year-to-date the ETF is up 12.3 percent, easily outpacing the return of the overall U.S. stock market. The expense ratio is a low 0.16 percent.
Outside of the U.S. the utilities stocks have also been performing well. The WisdomTree Global ex-U.S. Utilities ETF (NYSE: DBU) is up 7.4 percent this year and it also pays a 3.5 percent dividend yield. The ETF charges a higher expense ratio of 0.58 percent due to its international exposure. The three countries with the largest exposure include Brazil, France, and the U.K.
The longer-term chart of the iShares Cohen & Steers REIT ETF (NYSE: ICF) is not was bullish as the utilities, however the recent breakout to a multi-month high is promising. The current yield on the ETF is 3.2 percent and year-to-date the ETF is up 13.3 percent. The basket of 30 stocks charges an expense ratio of 0.35 percent.
Internationally there is the iShares International Property ETF (NYSE: WPS), which concentrates on developed markets around the world with the exclusion of the U.S. Japan, Hong Kong, and Australia make up over half of the portfolio. The dividend yield is 3.1 percent and the expense ratio is 0.48 percent. Year-to-date the ETF has not performed as well with a small loss. The loss can be attributed to the Japanese market struggling over the last few months.
While there are more options for investing in dividend-paying equities, the utilities and REITs have been stable options for investors during this tumultuous time for equities.