This public utility powerhouse boasts a natural monopoly, making it irresistibly appealing for long-term investors. The company serves over eight million electric and gas utility customers. It’s important to consider all the factors involved in purchasing utilities stocks, including the pros and cons that make these types of stocks unique. Enter your email address below to receive the latest headlines and analysts’ recommendations for your stocks with our free daily email newsletter. Be wary of any stock that has a very high yield — as a general rule, a yield above 10 typically means that a dividend cut is coming in the near future.
Utility stocks can be an important part of your dividend stock portfolio. They offer attractive dividend income and growth of that income from dividend increases. I find it positive to have a few higher-yielding dividend stocks in my portfolio for the extra income they provide.
Not only is this stock poised for growth and possesses A+ profitability, but its discounted price is also extremely attractive. As recessionary concerns, monetary policy, and overall fear continue https://1investing.in/ to create chaos in the markets, the utility sector has been resilient. Compared to the S&P 500 which is down approximately 13% YTD, the Utilities Select Sector SPDR ETF (XLU) is +6% YTD.
And I have been investing in utility stocks for more than 40 years. Sempra is an energy infrastructure company headquartered in San Diego with an employee force that’s 20,000+ strong. The company serves more than 40 million customers across North America and had more than $72 billion in total assets at the end of 2021. While not the most generous advantage and disadvantage of joint venture payout, CNP stock has gained more than 18% since the start of this year. Also, CenterPoint features solid profitability metrics, including a 16.3% return on equity that’s above the industry median of 8.3%. Investing in a utility ETF instead of a single utility is the easiest way to avoid the risks that come with betting on a single company.
It’s already redeploying that capital to adapt to long-term sustainability concerns in the utility sector. For instance, Dominion has joined into the Southeast Hydrogen Hub coalition. Additionally, D is among just 33 organizations that have been invited to apply for part of $8 billion in federal matching grants to establish regional hydrogen hubs nationwide. I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional.
Types of Utility Companies
Today, we’ll take a look at these stocks that investors are keeping their eyes on. We’ll also introduce you to a few brokers you can use to begin purchasing them, index funds and more stocks under $5 worth exploring. The sale of this asset should result in approximately $175M to $200M after taxes. With the profits of the sale added to its balance sheet, the company’s overall profitability grade stands to be further bolstered. As you look at the A- grade above and underlying metrics, the sale should make shareholders even happier, adding to its amazing track record of consistently paying its dividend.
Sheltered beneath the steadfast umbrella of regulatory guidelines, they’ve proven to be remarkably reliable investments over the years. Other metrics can help you decide whether you’ve found the right utilities stock. In 2021, NRG received the Excellence in Environmental Initiatives SEAL Business Sustainability Awards.
National Fuel Gas Company (NYSE:NFG)
While this temporarily hurt its cash flow and led to a cut to its bond rating in 2020, it’s banking on future oil prices rising for these investments to pay off. Constellation Energy reported annual revenues of $19.64 billion for the fiscal year 2021, showing an increase of 11.62% from 2020. Its stock has an annual dividend yield of 0.68% and pays a quarterly dividend of $0.14. Its value has increased 38% since its inception in late February 2022. NiSource reported revenues of $1.18 billion for the second quarter of 2022, a 20% increase over revenues of $986 million for the same period a year ago. Its stock pays an annual dividend yield of 3.62% and a quarterly dividend of $0.24.
Some energy stocks are a good bet during a recession, but not all energy companies do well in a downturn. Utility stocks that distribute electricity and natural gas have steady revenues and cash flow, making them great stocks to own during a recession. In response to the collapse of energy prices during the Covid-19 pandemic, Royal Dutch Shell cut its dividend, a blow to income investors who held its stock.
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A poorly run utility, one that doesn’t provide good service to its customers, is at risk of losing its license to operate in the state. This can cause its stock value to plummet rapidly and result in a significant loss of value in an investor’s portfolio. “Eaton has paid a dividend every year since 1923 and has grown by 35% over the past five years,” Harrison says.
Thus, I’m not providing you individual advice in any of these areas. The company’s service territories are focused in the Southeastern and Mid-South United States. Altogether, they serve more than 9 million customers across the territories they cover.
- Its stock has an annual dividend yield of 0.68% and pays a quarterly dividend of $0.14.
- Thus, the smart money doesn’t anticipate much movement toward the lower price points.
- In other words, higher dividend yields usually come with lower potential dividend growth.
- Moving in the OTM direction, IV steadily rises, almost in a linear fashion.
As brokers have a deeper insight into stocks, one must follow rating upgrades for solid returns. We choose Abercrombie & Fitch (ANF), Owens (OC), Belden (BDC), Hexcel (HXL) and Consolidated Water (CWCO) as these witness rating upgrades. Investors need to pay close attention to Eversource Energy (ES) stock based on the movements in the options market lately. The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find. Investors need to pay close attention to New Jersey Resources (NJR) stock based on the movements in the options market lately. If you don’t already have a brokerage account, choose the right type of brokerage for your particular needs and set up your account.
It also shifted a sizable share of its spending away from capital projects for oil and gas and is now focusing more on the development of renewable energy projects. Dominion Energy provides natural gas and electricity to over 5 million customers in states that include South Carolina, North Carolina, Idaho, Georgia, Ohio, Wyoming and Pennsylvania. The utility has been in trouble with federal regulators in the past but has made strides to improve its emissions output and improve the quality of the environment in areas affected by its pollution. The company is leading the way in clean energy generation and has a strategy to reach net-zero emissions for carbon and methane. Duke Energy is based in Charlotte, N.C., and delivers electricity to Ohio, Kentucky, Indiana, North and South Carolina, Florida and Puerto Rico.
Top 9 Best-Performing Stocks: September 2023
It also has a conservative dividend payout ratio, giving it the flexibility to invest in cleaner energy. The water utility has the financial flexibility to support its expansion plan, thanks to its top-tier financial profile. It has an investment-grade credit rating, giving it the ability to borrow money at lower rates. Meanwhile, it has a very conservative dividend payout ratio (it has targeted an average between 50% to 60% of its adjusted EPS).
A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008. His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money. Interestingly enough, however, OTTR also has a modest manufacturing segment engaged in machining, metal parts stamping, and production of plastic containers, among other services. The whole company posted about $1.2 million in revenues last year, with the electric utility arm of the company representing about 40% of that. FLNC offers energy storage products and services, along with AI-enabled digital tools to improve grid efficiency and distribution. In January, ConEd recorded its 49th consecutive annual increase for stockholders — the longest period of consecutive annual dividend increases of any utility in the S&P 500 Index.
Due to heavy regulations and unfluctuating demand, companies in the utilities sector have limited opportunities to score outsized profits. Moreover, since these companies provide public amenities that all Americans require, utilities must follow specific rules to ensure that all communities and areas have access to comparable service levels. When markets whirl, and economies waver, they remain a reliable refuge, offering consistency and resilience to weather any storm. Whenever interest rates climb, stock prices drop, which can affect utility companies. They’re also vulnerable to policy shifts and due to regulation. Regardless of the type of utility you’re familiar with on a day-to-day basis, think beyond the water that comes out of your faucet and the electricity that appears with the flick of a switch.
- Rather than financing from earnings or cash from selling stock to the public.
- It plans to triple its capacities by 2027 and has a total of 4x its current 15 GW capacities in the growth pipeline (68% solar).
- And, higher interest expense results in lower profits for utility companies and their shareholders.
- American Water Works provides fresh water to 13 states, as well as the US military.
- That is the risk of losing all or most of your investment dollars.
While the red ink in the open market isn’t exactly pretty, it appears that options traders sense the worst may be over. From its volatility smile, IV sits at a low of roughly 0.18 at the $80 strike price. However, it gradually scoots higher to a blistering IV of 1.28 at the $130 strike. This backdrop indicates strong enthusiasm among the smart money that AEP will make a robust comeback. While even the so-called best utilities stocks will likely never be mistaken for sexy opportunities, they offer exceptional relevance, especially at this juncture. With Wall Street unsure how to digest various macroeconomic news, the utilities space brings some predictability to your portfolio.
However, utility stocks often are more stable than companies in other sectors, and have reliable revenue streams that often support generous and sustainable dividends over the long term. So if you’re looking for income or looking for a bit less uncertainty, here are nine of the best utility stocks to buy now. Or, reinvest back into utility stocks and other dividend stocks of my choosing. Investing in AEP means a 3%+ dividend yield and a 6% projected annual dividend growth rate. Therefore, AEP stock represents an attractive combination of current dividend yield and future dividend growth.
NFG has been very strategic in its operations to ensure operational and financial success. With the difficult regulatory environment in California, NFG recently opted to sell its Sentinel Peak located in California for $280M in cash and $30M contingent consideration. Vista has several development projects in the works, and Q1 retail metrics have been strong, allowing the company to maintain its 5-star rating and navigate the volatile commodity market.