This ignored corner of the market offers yield for income-seeking investors — and it's on sale
Income-seeking investors can find a bargain right now in the utilities sector. Utilities stocks are generally known for their safe dividends, but they aren't having a good year when it comes to returns. The Utilities Select Sector SPDR Fund has lost nearly 5% so far in 2023, compared to the S & P 500 's 19% gain. That means investors have the opportunity to scoop up some cheap stocks and earn income while waiting for them to rebound. Utilities are also considered a defensive play amid lingering concerns about a potential recession. CNBC Pro screened for utilities in the utilities ETF that pay a dividend of 3.5% or more, and whose payouts are considered safe — with a dividend coverage ratio of at least 3. The dividend coverage ratio measures the net income of a company relative to the amount of dividends paid out to shareholders. Dominion Energy tops the list with a hefty 5% dividend yield. The Richmond, Virginia power producer also has a cash dividend coverage ratio of 3.2 and 7.2% upside to the average price target, according to FactSet. Just 23.5% of analysts covering the stock rate it a buy. The company is set to report earnings on Friday. Shares are down nearly 13% year to date. D YTD mountain Dominion Energy year to date With its 3.4% dividend, American Electric Power has the biggest upside to the average price target at 13.5%. Some 43% of analysts covering the stock rate it a buy. Last week, the Columbus, Ohio-based utility reported second-quarter operating earnings per share in-line with analysts' estimates and reaffirmed its full-year earnings per share guidance. The safest dividend comes from NiSource , headquartered in Merrillville, Indiana – about 35 miles from Chicago. NiSource has a cash dividend ratio of 4.4, a dividend yield of 3.6% and 11% upside to analysts' average price target. Three-quarters of the analysts covering NiSource rate it a buy. Latest quarter results are expected to be released on Wednesday.