5 Best Utility Stocks for Dividend Growth

The company posted an 8% earnings gain in 2015 and anticipates that it will continue to deliver profit growth at a rate of 6% to 8% for at least the next two years. NextEra placed big bets on clean energy—primarily wind and solar—more than a decade ago. Now roughly 40% of its profits come from renewable-energy projects, and it continues to expand that segment of its business at a rapid clip. Though NextEra also owns a natural gas pipeline business, which suffered plunging gas prices last year, the rest of the company is performing so well that earnings didn’t miss a beat. NextEra’s focus on Florida, where population growth is strong, is a plus, says Hilliard Lyons’s Burks.

For example, American States Water appears to be 13% overvalued at current prices using its “Normal” PE of 21. Meanwhile York Water Co. has a higher current PE of 25, yet is trading at fair value due to the market traditionally rewarding it with a higher multiple. So while I am projecting a 4.3% annualized return for AWR and a 7.5% return for YORW, this assumes that the market will continue to reward YORW with a premium valuation over the others on the list. Otter Tail (OTTR, $66.14) is one of the smaller utility stocks on this list. The company has a relatively modest electricity generation business that serves some 135,000 connections at residential, commercial and industrial customers in the Minnesota region.

Below, we look at the top utilities stocks in the categories of best value, fastest growth, and most momentum. The utility sector is among the many industries that endured the financial distress caused by the COVID-19 virus. According to Deloitte data, overall energy demand has decreased but did not slump during the pandemic peak. The need for energy in the industrial sector went down as the manufacturing industry has halted. In contrast, the demand for power in the residential sector has increased due to individuals having been ordered to stay at home to prevent coronavirus spread. Even though Chesapeake Utilities has a lower dividend yield, looking at the charts below you can see that it has increased its dividend at a higher rate than Laclede over the past five and ten year periods.

• Finally, I have added a column for the debt/cap for each company to go along with the S&P credit rating.
• This long-term dividend growth is another hallmark of the best utility stocks to buy.
• This should give it plenty of room to increase the dividend in future years.
• “Dividends are secure and should grow, but prices could rise and fall sharply in this environment” of ultra-low interest rates and elevated valuations, says Morningstar analyst Travis Miller.
• FPL is the largest electric utility in the state of Florida and one of the largest electric utilities in the U.S.
• Yet the company generates much of its revenue from other businesses, such as power (10%), and energy marketing (30%).

WEC Energy Group, formerly known as Wisconsin Energy, remains in the #9 slot on the list. Since the last article, Wisconsin Energy completed its acquisition/merger with Integrys that is expected to enhance the long-term growth prospects for the company. PPL is currently trading near fair value and this appears to be a reasonable entry point for purchase. The company isn’t as high on my personal radar as some of the others on the list, but if it can hit the targets provided by management, would be a nice opportunity for investors.

Most of the US gas and electric utility industries are regulated to some degree. The rates they can charge are approved and regulated by state regulatory authorities. While utilities can be subdivided into these and other sub-segments, many of the biggest utilities stocks are actually holding companies that own several subsidiary operations of one or more types.

The propane business, which accounts for nearly two-thirds of revenue, does little to smooth out those revenues. Analyst projections of less than 1% profit growth this year and next seem parsimonious. At 17 times trailing earnings, Portland trades at an 8% discount to its industry median.

Duke Energy

If you want to skip our detailed analysis of these stocks, go directly to 5 Best Utility Stocks to Invest In. Improved margins, service expansions, and infrastructure improvement programs will help guide this growth. The company provides electricity to 2.9 million customers in Arkansas, Louisiana, Mississippi and Texas, and also serves about 200,000 natural-gas customers. One of the country’s largest utilities, Duke Energy (DUK) serves nearly 8 million electricity customers in the Southeast and Midwest, plus 1.6 million natural-gas customers. The company also controls more than 50,000 megawatts of generating capacity. Analysts target profit growth of 19% this year, followed by 22% and 12% in the next two years.

• Throughout the year I’ve been attempting to find the top stocks for dividend growth and income from the different sectors of the market.
• Southern’s debt to equity ratio is the highest of the 6 utility stocks we are discussing today.
• This is a huge benefit for utility stock dividend investors that otherwise have low incomes.
• “DUK is well positioned as a core utility investment that operates in the Southeast across constructive regulatory jurisdictions,” Karp mentioned.
• “We expect PNW’s earnings to be lumpy over the next few years, and we believe that favorable summer weather and recent regulatory outcomes warrant a more constructive view on the stock,” Karp said.

Ask these questions to understand past and potential dividend growth. For example, an electric utility may produce power but rely on a partnership with another utility to transmit it and sell it. First of all, electric utilities produce, transmit and sell electricity to customers.

Investing In A Defensive Utility Stock – Wisconsin Energy Group

To be clear, I didn’t omit those companies because they are poor investment ideas, I did so simply because I didn’t think they quite fit alongside the electric and gas distribution utilities that were selected. Throughout the year I’ve been attempting to find the top stocks for dividend growth and income from the different sectors of the market. Earlier this month I presented my updated outlook on the utility sector with The Top 10 Utility Stocks For 2016 And Beyond.

Diversified utility stock AES (AES, $26.52) is based in Virginia, but may be familiar to folks in the Midwest through its AES Ohio and AES Indiana operations. This utility stock is even more geographically diverse than that, though, with worldwide operations that span South and Central America, the Caribbean, Europe and Asia. All told, it operates a power generation portfolio of almost 32,000 megawatts – enough energy to power as many as 28 million homes.

My Favorite Utility Stock For 2016: 41 Years Of Dividend Increases

To find the best-performing utility stocks, we screened U.S. companies that are included in the “Utilities” sector. These include independent power producers, diversified utilities and regulated electric, gas and water utilities. Another reason I think ConEd is a good stock pick for income investors is that it appears to be well-equipped to handle rising interest rates. It seems that by far, the top concern investors have regarding utility stocks is the prospect of higher interest rates going forward.

And in an age when semiconductors are part of just about everything we use, the services Applied Materials provides are increasingly in demand. That’s partially because of a rise in gold prices in the first half of the year, but also because of stability in the junk beaxy exchange review bond market, whose tumult threatened to cause industry-wide turmoil about a year ago. That’s partially because of Best Buy’s investment in its own digital sales operation, with more than $4 billion in online sales across fiscal 2016 for more than 10% of total sales.

While we recently dropped Fortis (FTS) from our Long-Term Buy List, it remains one of our top utilities because of its predictable profit stream. The consensus projects earnings growth of xm group 6% this year, 8% next year, and 6% in 2023. Fortis provides electricity to 2 million customers and natural gas to 1.3 million, with operations in the U.S., Canada, and the Caribbean.

Dominion Energy, Inc. (D)

This long-term dividend growth is another hallmark of the best utility stocks to buy. Dominion Energy (D, $62.00) is the largest of the utility stocks on this list and one of the five biggest electricity providers capex broker analysis listed on U.S. markets. The company is a powerhouse of the sector, with a portfolio of assets that include roughly 30 gigawatts of electric generating capacity, mostly in Virginia and North Carolina.

SRE was formed in 1998 from the merger of Pacific Enterprises and Enova Corporation, which owned Southern California Gas and San Diego Gas and Electric. The company currently uses a comprehensive system to track and collect ESG data, which it makes available in its yearly sustainability report. Chesapeake also holds the advantage over Laclede in terms of returns on assets, equity, and invested capital. The next set of data I reviewed was the Fundamental and Value Scores for each of the ten remaining stocks. These scores are calculated by YCharts and I have found them to be very useful when researching investment options.

This comes after many years of substantial dividend increases. I find it positive to have a few higher-yielding dividend stocks in my portfolio for the extra income they provide. This should give it plenty of room to increase the dividend in future years. Most of the company’s capital spending plan for the next several years is targeted at regulated investments.

Chesapeake Utilities has also increased its Funds From Operations per share at a higher rate over the past five years compared to Laclede Group. Out of this group of stocks, my top pick is Chesapeake Utilities. While I believe that AGL Resources is a solid company, the pending merger with Southern means that there will be very little price movement in its stock. Because of that I can’t consider it a top pick for this year. With a growing dividend and stable balance sheet, Laclede Group should continue to reward long term investors moving forward.