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Utilities Stock Funds Were 2011's Bright Star

 January 17, 2012 09:35 AM

Utility dividend stocks. When you hear those words what do you think of? Long considered the domain for "widows and orphans", utilities have developed a somewhat stodgy reputation. Why are utilities considered good for widows and orphans? Here a few reasons:

1. They are generally less volatile than the market
2. Their products are something that people need
3. Their dividends tend to be more stable and secure

According to research using Morningstar's data, seven of 2011's top 10 U.S. stock funds were utilities sector funds, including top-ranked ProFunds Utilities UltraSector (UTPIX), which returned nearly 26 percent. The lowest return of the 10 funds was 16.07%, which is incredible when you consider the Standard & Poor's 500 was virtually flat in 2011.

I am not generally a fan of funds (mutual funds, ETFs, CEFs, etc.), since I believe hand selected individual dividend stocks will usually beat an indexed fund's performance, over time. Below are some of the top performing utility stocks that I track with a 2011 dividend adjusted return greater than 20%:

Duke Energy Corp (DUK). provides service to 3.9 million electric customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky, and 500,000 gas customers in Kentucky and Ohio. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 7 consecutive years.
Yield: 4.7% | 2011 Return: 30.2%

Consolidated Edison, Inc. (ED) is an electric and gas utility holding company that serves parts of New York, New Jersey and Pennsylvania. The company has paid a cash dividend to shareholders every year since 1885 and has increased its dividend payments for 38 consecutive years.

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