Utility sector stocks are shares in companies within the utility sector. Dominion Energy Inc (D), for example, is one of the top 10 constituents or one of the largest stocks within the sector. A few other firms that are part of the Dow Jones utility index are Southern Co (SO), Exelon Corp (EXC), and American Electric Power (AEC).
How Does the Utilities Sector Work?
The utilities sector tracks companies’ performance within the utility industry. While most utility companies are regulated government entities, others are unregulated and contractually guaranteed entities. As of September 2019, there are just under 550,000 jobs stemming from the utilities sector. And according to the U.S. Bureau of Labor Statistics, there are five main services that companies within this sector provide:
Electric powerNatural gasSteam supplyWater supplySewage removal
What It Means for Individual Investors
Since utilities are a necessary part of modern life, the utility sector is in high demand. As a result, utility sector stocks are relatively stable investments. Plus, the regulation of this industry and lack of competition in most regions make many utility companies’ performances more predictable, which is particularly helpful when investing. You can begin investing in utilities sector companies through exchange-traded funds or ETFs (like the Vanguard Utilities ETF and the Fidelity MSCI Utilities ETF), the S&P 500 Utilities index fund, or by researching and investing in individual utility companies.
Utilities Sector Stocks vs. Energy Sector Stocks
The main difference between the utilities sector and energy sector are the companies within each industry and the tasks they complete. The utilities sector includes companies involved in the production and distribution of utility services to customers, whereas the energy sector includes companies involved in the exploration, management, and production of resources such as water, oil, and electricity.
