Updated: May 11, 2016
Billionaire “Bond God” Jeffrey Gundlach just shared his favorite short idea at the Ira Sohn investment conference last Wednesday. Dividend investors take note – the high priest of fixed income just panned your longtime standby!
Utilities aren’t safe, says Gundlach. Their valuations are stretched to the upside, and their yields are too low. So he recommends a pair trade that shorts the Utilities Select Sector SPDR (XLU), which pays a meager 3.3% today:
Utility Yields At 7-Year Lows
A low yield can be OK if dividend growth is meaningful, but few utilities are boosting their payouts at a fast enough pace to compensate. Of XLU’s top five holdings, only two – NextEra Energy (NEE) and Dominion Resources (D) …