Posted in Options Trading
By: Tom Gentile on September 6th, 2021 • 3 mins read
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The S&P 500 have been moving up at a 45 degree since bottoming on October 23, 2020. Over the last month this blue-chip index has set a number of all-time highs and there’s a sleeper sector among the leaders of the pack. “Tech”, you say? “Healthcare”? Yes, they’ve been strong sectors over the past month to be sure. Real Estate is the hottest sector this past month with a 3.74% rise, eclipsing all but one sector.
Second, only just, is UTILITIES with a 3.48% rise. You know, power and water companies. Stuff you use every day. Ho-hum, boring stocks you never hear about on CNBC have been leaders in this historic bullish market.
Check out the Sectorspdr.com overlay chart for the 11 sectors it tracks:
You can clearly see that the Select Sector SPDR Real Estate ETF (NYSE: XLRE) and the the Select Sector SPDR Utilities ETF (NYSE: XLU) are leading the charge over the other sectors.
Of particular interest and the reason for this article is that the XLU has popped up big over the last few days along with a “toppy” S&P 500. This is a classic sign of a flight to safety. People will always use utilities in any market or economic condition. This makes these ho-hum utility stocks attractive as a “flight to safety” play, PARTICURARLY since they tend to pay bigger dividends over most other stocks.
Check out the high dividend yields for the top 20 XLU stocks (yellow column) below from Tom’s Trading Tools:
Average dividend yield for S&P 500 stocks is 2.5%. Each one of the top 20 stocks in the XLU sector is greater than average. PPL (NYSE: PPL) is over twice that.
There we have reason #2 to buy the cream of this crop. Dividends.
From here, you could simply buy the higher dividend stocks and ride the ride and get paid to do so.
Of course, it makes sense to buy XLU stocks which are the leaders of the Utilities pack. I have a scanner to find those for me. It’s called the “Close % Change” ranker and finds stocks that are moving up (or down) the most.
Here are the 10 most bullish utilities stocks over the last month:
Entergy (NYSE: ETR) has risen 8.27% over the past month and is paying a 3.36% dividend. It is also flirting with 18-month highs.
Exelon (NYSE: EXC) has skyrocketed 6.92% this past month and is paying a 3.36% dividend. It just set an 11-month high with more upside in site.
Southern Company (NYSE: SO) has risen 4.99% over the past month and is now only $4 shy of an all-time. This one’s on fire. It pays a 3.93% dividend.
The strategy is simple. Buy these stocks. Profit on continued money flow into utilities AND collect the exceptional dividend.
Want more profits?
Sell covered calls. Sell 30-day Out-of-the-Money (OTM) calls (strike higher than stock) for more premium.