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Quarter-End Insights

Our Outlook for Utilities Stocks

With interest rates leveling off and power markets stalled, utilities face a tough near-term outlook.

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  • Since June, forward power prices in most of the Eastern U.S. regions have retreated 5%-10%, keeping pressure on the near-term earnings outlook for utilities with wholesale power generation. 
  • The spread between utilities' 4.1% average dividend yield and 10-year U.S. Treasury yields remains near its 20-year high, suggesting that some utilities with 4%-5% yields still have room to run.
  • We think valuations for many regulated utilities are stretched, given the risks of regulatory rate cuts, higher interest rates, and dividend tax hikes.

Travis Miller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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