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3 Yield Opportunities in the Utilities Sector

With solid growth prospects and dividend yields above 4%, income investors would be wise to consider high-quality utilities such as Southern Company, Duke, and Public Service Enterprise Group.

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Travis Miller: 2014 has been a tale of two halves for utilities. The first half of the year, they rallied sharply; then they had the summer swoon between June and August. And since then, in the last month, they've rallied sharply again, outperforming the S&P 500. That leaves utilities up 15% in 2014--better than the S&P 500--and recovering from the poor performance, on a relative basis, that they had in 2013.

So, where does that leave us? Well, the dividend yield still looks attractive at about 3.9% for the sector, although that is below the 20-year average. And it does still look attractive relative to 10-year Treasuries at 2.5%. So, there's uncertainty here but still good yield opportunities for investors looking for income. We think the sector is in the best financial health and growth situation that it's been in in a decade or more.

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