FORK IN THE ROAD, STOCK HEADWINDS

The dividend yield on the telecom sector .SPLRCL is 5.2 percent while the utilities sector .SPLRCU holds a 3.4 percent yield compared with a 2.4 percent yield for the broad S&P 500 index. 

Those sectors have had divergent fortunes this year, however, with utilities up more than 12 percent while telecoms have dropped more than 14 percent, the worst among the major S&P sectors. 

Telecoms also show a forward price to earnings ratio (PE) of 12.9, well below the 17.6 of the S&P 500. Utilities, however, are slightly more expensive with an 18.4 ratio, which could make them less attractive to investors even with the dividend premium.

The utilities sector has a strong 50-day negative correlation to the 10-year yield of 0.87, indicating the opposite directions they have traveled in. Telecoms, while still a negative 0.24, have a looser bond. 

As investors weigh increasing risks for equities, including stretched valuations in what is typically a difficult period for stocks, the high dividend payers may be a safer play in a market that could be primed for a pullback. 

Tension with North Korea, economic disruption from major hurricanes and political wrangling in Washington are also among the issues investors have to contend with. 

“September and October are historically trying months for equities and add on to that geopolitical risk, it is somewhat prudent to be taking a little bit off the table here,” said Anthony Conroy, president at Abel Noser in New York.