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An In-Depth Look At The Extended Valuation Of Defensive And Income-Yielding Equity Sectors

Published Mon, 04 Jul 2016 04:40:35 -0400 on Seeking Alpha

Early last week, I highlighted the extended valuation of the utilities sector, in part due to investor demand for income-yielding stocks. Not only are the income sectors attracting investor dollars, defensive sectors like consumer staples are as well. A result of this investor demand for defensive and income producing equities is that these sectors have produced market-beating returns so far in 2016. As the below sector return chart shows, the defensive consumer staples sector and income-yielding sectors like utilities and telecommunications have generated strong returns this year.

However, the strong return in these sectors has pushed the sector valuation beyond the average longer-term valuation for each respective sector itself. The better-performing sectors, utilities and staples, are some of the most extended compared to the other sectors. Energy sector valuations are at extremes, largely due to earnings headwinds resulting from lower oil prices.

Of note is the fact that the telecommunications sector is the second-best performing this year, yet its current valuation, or P/E, remains below its 10-year average.

For utilities, the forward 12-month expected sector earnings growth rate is only 3.4%. In Q1 2016, although earnings were positive for the utilities sector, earnings fell 4.3% as compared to the same quarter last year. Consequently, with utilities trading at a forward P/E of 17.9 times and expected earnings growth of 3.4%, this leaves little margin... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
H&Q HEALTHCARE INVESTORS 19.46   0.0 0.00 1.82 9.45
BLACKROCK ENERGY AND RESOURCES TRUST 10.28   0.0 0.00 0.00 8.88
GABELLI UTILITY TRUST 7.01   0.0 0.00 0.00 8.62
JOHN HANCOCK BANK AND THRIFT OPPORTUNITY FUND 30.69   0.0 0.00 2.02 6.66
REAVES UTILITY INCOME FUND 36.70   0.0 0.00 0.00 5.85
PETROLEUM & RESOURCES 15.14   0.0 0.00 0.47 3.11
SPDR S&P 500 ETF 292.36   0.0 0.00 5.42 1.87

H&Q HEALTHCARE INVESTORS - HQH
H&Q HEALTHCARE INVESTORS - HQH  


Older articles featuring H&q Healthcare Investors (HQH):
Pace Of Dividend Cuts Accelerates In February 2019
High Yield Strategy Fails Again
Dividends By The Numbers For May 2018
Share In Healthcare And Biotech Gains With A 9.5% Yield
High-Yield Investing: Strategy For 2017, Risks And Sectors Set To Outperform
Retirement Income: High-Yield, Sustainable Capital CEF Portfolio Continues To Shine At One Year
Are CEF Investors Getting Suckered Into High Yields?
Best 'High Yield Sectors' For Income And Growth - To Consider Today
Retirement Security Amid Global Crises: The Problem Of Cutting Risk And Maintaining Yield
Stocks Trading Ex-Dividend on 5/20/2016

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