Investors once again are snapping up high-dividend-paying US stocks as Treasury yields fall, which should keep utilities and telecom stocks near the top of the buying list for the near future.
The S&P 500 utility sector, whose dividend yield at 3.9 per cent is more than 100 basis points above the 10-year Treasury yield, led the S&P 500's advance on Friday after concern about the launch of US air strikes on
The equity market recovered from early losses, in part due to news that
The utility sector is up 8.8 per cent since
Analysts say the attractiveness of high dividend-paying sectors such as utilities is not likely to end soon, especially with valuations still below the benchmark's level. The forward price-to-earnings ratio for S&P utilities is at 14.9, below the S&P 500's p/e of 15.2,
"The US 10-year is an attractive yield given the backdrop of very weak yields around the world. Therefore, that does make the dividend-paying sectors increasingly attractive. That's been the footprint for this market," said
The S&P 500 utility sector shot up two per cent on Friday, its biggest daily percentage gain since June. Earlier last week, the index flirted with correction territory as it lost nearly 10 per cent from a high set
Also benefiting from the drop in bond yields are exchange-traded funds tied to dividend payers, including the Powershares Dividend Achiever exchange-traded fund, which rose 1.3 per cent on Friday and is up 3.2 per cent for the year.
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