As I discussed last week, China — while still among the fastest-growing of the world’s largest economies — is going through some economic doldrums. Its GDP is expected to grow less than 7% in 2015, down from an average of 8.1% annually for the first four years of the decade.

I told you last week about some of the industries, and a few specific companies, that have enormous exposure to China. If your portfolio is heavily leveraged on Chinese growth, you may want to pare back holdings in these areas.

#-ad_banner-#Today, I’ll highlight another stock that has no exposure to China’s economy. A slowdown that’s worse than expected over there will have no impact on this all-American gem’s bottom line.

Before I get to the specific recommendation, consider the parts of our economy that don’t do much business with China — either by selling goods and services to China’s huge, growing middle class or by taking advantage of Chinese manufacturing plants. 

The most obvious such area is a service provider focused solely on U.S. customers. For example, most hospital and home healthcare companies have little overseas exposure other than in Canada; Kindred Healthcare (NYSE: KND) is a prominent example. And while some restaurant companies, like Yum! Brands (NYSE: YUM), are among those most heavily invested in China, others, such as Panera Bread (Nasdaq: PNRA), are located solely in North America. 

Technology is strongly associated with China, both as a growth market for its products and as a source of low-cost manufacturing in the case of smartphones, microchips and other hardware. But some tech companies have little or no exposure, including giant Alphabet (Nasdaq: GOOG), which reportedly has less than a 2% share of Internet search in China due to the government blocking its service via the infamous “Great Firewall of China.”

All of these areas include attractive stocks. But right now, the best way to build up a firewall of your own to China’s economy may be through utility stocks that pay above-average dividends yet are undervalued due to concerns about the potential for rising interest rates here in the United States. I recommended two attractive utility stocks on September 30th, and both remain Buys today. Here’s one more to consider:

Xcel Energy (NYSE: XEL) is a well-diversified, financially strong electric and natural gas utility that serves 3.5 million electricity customers and 2 million natural gas customers in Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin.

Based in Minneapolis, Xcel was formed over time by the merger of long-lived utilities Northern States Power (in Minnesota and Wisconsin), Public Service Company of Colorado and Southwestern Public Service Co. (serving eight Midwestern states), as well as WestGas Interstate, a natural gas pipeline company. About 80% of its revenue comes from electricity, with most of the rest from natural gas utilities.

Xcel’s fuel base is a little more coal-heavy than I’d like to see, at 46% of electricity generated. Given the likelihood that environmental regulations will force utilities away from these relatively dirty plants, Xcel may need to make higher capital investments than other companies in the coming years. However, the company is well positioned to do so: it has already diversified in the direction of natural gas and alternatives in recent years. In fact, Xcel is the #1 wind-power generator in the United States, deriving 15% of its power from wind alone; the company’s CEO recently said he expects to generate more than 30% of its power from renewables in Colorado and Minnesota by 2020.

It’s also good news that Xcel gets a third of its power from natural gas and nuclear, which are not only relatively clean compared with coal, but low-cost energy sources. Natural gas prices are at historic lows, and nuclear power plants are actually fairly inexpensive to operate once they’re built (which is extremely expensive). So with low-cost power sources rising as part of its fuel mix, Xcel looks poised to enjoy rising cash flows from its regulated operations for years to come.

Xcel has decent relationships with utility commissioners in the states where it operates, and recently won rate increases in four that will help boost revenue over the next two years. Xcel has increased its dividend consistently since 2004 and currently yields 3.6%. Despite the always-significant capital expenditures required of a utility, the company’s long-term debt is only about half of its total capitalization.

Although the stock has rallied since its August correction, it still trades below its 52-week high and at an attractive valuation relative to its history.

Risks To Consider: Xcel is a relatively low-risk stock, given its reliable cash flow, strong balance sheet, diversified operations and fuel mix and leadership in the growing renewables space. However, rising interest rates could hurt the stock in the short run, as could bad news concerning an unfavorable regulatory decision in the coming quarters.
    
Action To Take: Add solid, dividend-paying utilities such as Xcel to your portfolio as a way to hedge against exposure to China (or cyclical stocks) should the economy there (or here) turn more sharply negative than the market currently expects. Xcel is a buy under $37.50.

Editor’s Note: Millions of people use this company’s products every day — that’s just one reason this income stalwart has already paid more than 542 consecutive monthly dividends. Is it in your portfolio? Learn the name of this high-yielder in the High-Yield Hall of Fame special report.