Investing For More Yield

    Published: 06-16-2009
    Views: 9,775
    Ron DeLegge, Founder of ETFguide, explains how to invest for more yield in the stock market and a higher cash flow by investing in utilities.

    Ron DeLegge: If you are a dividend income investor on the prowl for more dividend cash flow, I am Ron DeLegge with ETFguide and you are in for a treat.

    Last year the number of S&P 500 companies paying a dividend touched a 17 year high and the number of companies increasing dividends also touched multi-decade highs. Now, none of this however changes the fact that S&P 500's dividend yield has been stuck in a 33 year bear market. After peaking at 5.

    5% in 1981, the S&P 500's dividend yield today has fallen to under 2%.

    From an income perspective, dividend investors have been taking a 67% pay cut courtesy of the S&P 500's declining yield. Now, one remedy for lower yields is to own higher yielding sector ETFs, like the S&P Utilities, ticker symbol XLU. The annual yield for XLU hovers around 3% and is 50% higher versus the broader S&P 500. Here is another great part about Utilities; it's a relatively stable industry sector that provides and produces positive cash flow year in and year out.

    Now, some of the top holdings within XLU include companies like Duke Energy, Dominion Resources and American Electric Power. All of these companies are involved in producing and transmitting electricity and natural gas. So if you want more dividends, plug into Utilities.