The utilities sector is one which has been one of my top defensive recommendations for investors in recent years. This is particularly due to the relative stability this sector provides in terms of earnings and cash flow generation.
With a full-blown recession now upon us, now is a great time to gain exposure to this sector and thereby ramp up the defensiveness of one’s portfolio. In this article, I am going to discuss one Exchange Traded Fund (ETF) which provides investors with a well-diversified, low-fee option to play this sector.
The iShares Capped Utilities ETF (TSX:XUT) is perhaps my favorite utilities-focused ETF for all investor types. This ETF offers great exposure to regulated utilities and the stable cash flows provided by these revenue streams.
The dividends paid out by this sector are supported by said cash flows. This creates a level of dividend safety which I believe is really unparalleled in financial markets today, when assessing all sectors of the financial market independently.
This ETF provides investors with a very reasonable dividend yield and a very low management expense ration (MER), resulting in an income stream much similar to that of a portfolio of fixed income securities such as bonds.
For those entering or nearing retirement age who do not want to reach for yield, this is an ETF I would highly recommend, particularly in our current economic climate.
Invest wisely, my friends.
