Investors seeking dividends in 2016 should focus on utility stocks, which have underperformed in 2015.

The exchange-traded fund tracking the sector, the Utilities Select Sector SPDR Fund (XLU) , is underperforming the S&P 500 so far in the fourth quarter and year to date, and is in correction territory. Its three largest holdings -- Duke Energy (DUK) , NextEra Energy (NEE) and Southern Company (SO)  -- are mixed against the S&P and the utilities ETF.

The ETF has a dividend yield of 3.65%, but Duke has a 4.82% dividend yield while Southern Company's is 4.79%. They are your better choices.

Duke Energy and Southern Company are the better known stocks among the 29 components of the utilities ETF. The top three companies represent 25% of the index weight.

Here's a scorecard for the utilities ETF and the three largest components.

 

Here's the daily chart for the utilities ETF.


Courtesy of MetaStock Xenith

The utilities ETF closed Thursday at $41.90, down 3.2% so far in the fourth quarter and down 11.3% year to date and in correction territory 15.8% below its all-time high of $49.78 set on Jan. 28. The ETF is just 2.7% above the 2015 low of $40.80 set on Aug. 24.

The weekly chart is negative with the ETF below its key weekly moving average of $42.79 and above its 200-week simple moving average of $40.24, last tested during the week of Oct. 7, 2001 when the average was $32.01.

The horizontal lines are the Fibonacci retracement of the rise from its 2009 low of $22.53 to the all-time high. As shown on the chart the ETF has been trading back and forth around its 23.6% retracement of $43.31 since the week of May 3, 2014. The 38.2% retracement of $39.34 could not stay above its 50% retracement of $45.51.

Investors looking to buy XLU should place a good till canceled limit order to buy the ETF if it drops to $38.18, which is a key level on technical charts until the end of 2015. Investors looking to reduce holdings should place a good until canceled limit order to sell the ETF if it rises to $46.93, which is a key level on technical charts until the end of this week.

Here's the daily chart for Duke Energy.


Courtesy of MetaStock Xenith

Duke Energy (8.39% weighting) closed Thursday at $67.43, down 6.3% so far in the fourth quarter and down 19.3% year to date and in bear market territory 25.1% below its all-time high of $89.97 set on Jan. 28. Duke is just 2.9% above the 2015 low of $65.50 set on Dec. 3.

The weekly chart is negative with the stock below its key weekly moving average of $68.78 and its 200-week simple moving average of $70.89. The weekly momentum reading is projected to decline to 22.69 this week down from 24.90 on Dec. 4.

The horizontal lines are the Fibonacci retracement of the rally from the 2009 low of $35.11 to the all-time high. As shown on the graph, after the spike to the all-time high the stock plunged below its 23.6% retracement of $77.08, which now appears as a barrier. Note how the 38.2% retracement of $69.08 has been a magnet since the week of June 8, 2012. The 50% retracement of $62.60 is the next key level to the downside.

Investors looking to buy Duke should place a good till canceled limit order to buy the stock if it drops to $66.44, which is a key level on technical charts until the end of next week. Investors looking to reduce holdings should place a good until canceled limit order to sell the stock if it rises to $71.41, which is a key level on technical charts until the end of 2015.

Here's the daily chart for NextEra Energy.


Courtesy of MetaStock Xenith

NextEra (8.75% weighting) closed Thursday at $97.60, up just 0.1% so far in the fourth quarter but down 8.2% year to date and in correction territory 13.4% below its all-time high of $112.64 set on Jan. 28. NextEra is 4.1% above the 2015 low of $93.74 set on Sept. 11.

The weekly chart is negative with the stock below its key weekly moving average of $99.65 and above its 200-week simple moving average of $86.83, last tested during the week of Nov. 25, 2011 when the average was $54.97. The weekly momentum reading is projected to decline to 42.54 this week down from 48.58 on Dec. 4.

The horizontal lines are the Fibonacci retracement of the rise from $33.86 in Oct. 2008 to its all-time high. As shown on the chart, NextEra held its 23.6% retracement of $93.94 on weakness off the high. The 38.2% retracement is a major technical support at $82.46.

Investors looking to buy NextEra should place a good till canceled limit order to buy the stock if it drops to $90.29, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good until canceled limit order to sell the stock if it rises to $100.47, which is a key level on technical charts until the end of next week.

Here's the daily chart for Southern Company.


Courtesy of MetaStock Xenith

Southern Co (7.89% weighting) closed Thursday at $44.49, down just 0.5% so far in the fourth quarter and up 10.9% year to date and in correction territory 16.3% below its all-time high of $53.16 set on Jan. 28. The stock is 7.5% above the 2015 low of $41.40 set on June 26.

The weekly chart is negative with the stock below its key weekly moving average of $44.63 and just below its 200-week simple moving average of $44.56. The weekly momentum reading is projected to decline to 56.25 this week down from 58.15 on Dec. 4.

The horizontal lines are the Fibonacci retracement of the rise from its 2009 low of $26.53 to the all-time high. As shown on the chart, Southern Company has been trading mostly between its 38.2% retracement of $42.96 and its 23.6% retracement of $46.84 since the week of Feb. 29.

Investors looking to buy Southern Co should place a good till canceled limit order to buy the stock if it drops to $43.92, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good until canceled limit order to sell the ETF if it rises to $46.64, which is a key level on technical charts until the end of 2015.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.