Utilities are a late cycle defensive option

March 11, 2019

Published by Harvest ETFS

Investing in infrastructure and utilities stocks has taken on a new appeal as we enter the late stages of a global economic expansion.

In good times or bad, we all use highways, need to heat our homes and expect our taps to provide clean water. Infrastructure and utilities are the behind-the-scenes systems that do that. They are the sorts of things that we only notice when they go missing.

Because of the size and cost of the projects, most utilities are monopolies, or near monopolies. So, prices paid for the services often include inflation-linked increases. The steady cash flows mean consistent dividends. So these companies can offer stability in choppy times.

Harvest ETFs launched the Harvest Equal Weight Global Utilities Income ETF (TSX: HUTL) , a global utilities ETF in January 2019.

The fund is invested in an equally weighted portfolio of 30 of the largest global companies in the utilities, telecommunication services an oil and gas storage & transportation sub-sectors. This includes solar, wind farm and other renewable energy production.  The portfolio has 55% of its assets in North America with the next largest holdings in Spain (13%), the UK (6%), France (6%) and Italy (6%).  The ETF includes such Canadian names as TransCanada, Enbridge, BCE, and Telus.

The portfolio is rebalanced every quarter and has a management fee of 0.50%.  The portfolio manager can lower volatility by writing call options on selected names to provide additional income.

In an interview as the fund was launched,  Harvest CEO Michael Kovacs said the ETF fits Harvest’s philosophy of combining income, capital appreciation and transparency.

“We know we are in the late stages of the economic cycle” he said, adding ”  utilities are a defensive investment that provide a steady source of income for investors.”

For more on Harvest ETFs (managed by Harvest Portfolios Group Inc.) click here.

 

 

 

The views and/or opinions expressed in the blog are of a general nature and are for informational purposes only. Blog contents should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Investors should consult their investment advisor before making any investment decision. 

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