Best Utility Stocks to Invest in 2024

Utility stocks are considered a defensive investment because companies in the sector provide essential services, like water, gas and electricity, and they remain resilient during economic downturns. Utility companies are also some of the best and most dependable dividend payers. 

Investors typically buy and hold utility stocks as a long-term investment to generate income through dividends. Utility stock prices also tend to be less volatile than other sectors because their business models are built on steady demand and predictable, often regulated prices, which make it easier for analysts to forecast their financial performance. On the downside, they are often sitting on high debt to cover the costs of network upgrades. 

Predictable profitability and income generation mean utility stocks are considered less risky and less volatile than other sectors, making them an ideal choice for risk-averse investors. In this guide, we take a look at the best utility stocks, based on factors such as financial position, dividend policy, growth prospects, and valuation. 

A Closer Look at the Top Utility Stocks to Invest in

We’ll now explore the investment case for the top utility stocks included in the list above.

1. Brookfield Infrastructure – Spending $30 Billion on Infrastructure

A leading player in the utility industry, with its diversified infrastructure assets, robust dividend, and steady growth trajectory, Brookfield recently raised $30 billion for private infrastructure investments to boost its future growth potential.

Diversification of the company’s investments, acts as a valuable hedge against economic downturns. As Brookfield is not a pure-play utility company, its exposure to different industries helps lower the risks associated with any single sector. Clean energy investments are also part of Brookfield’s portfolio. It’s one of the largest investors in renewable power assets. It manages a diverse portfolio of hydro, wind, solar, distributed energy and sustainable offerings.

The company offers stability and a reliable income stream through its attractive dividend yield and consistent growth potential. Its solid dividend yield of over 4% ranks among the highest in the utility sector.

2. Edison International – Steady Ship in Choppy Waters, Robust Dividend

With a 136-year history, Edison offers investors stability and growth. As the parent company of Southern California Edison, one of the largest electric utilities in the U.S., Edison boasts a robust customer base, predictable cash flows, and a commitment to rewarding shareholders. 

Edison’s robust dividend yield of over 4%, currently, consistently ranks among the highest in the utility sector, making it one of the best dividend utility stocks, attracting investors seeking reliable payouts over the long term.

Its focus on regulated utilities like electricity distribution means it’s certainly a stock to consider for a hedge against economic downturns. Unlike companies in more volatile sectors, Edison’s is less susceptible to economic and market fluctuations, offering stability for your portfolio in choppy markets. For example, in the 2022 bear market, when the S&P 500 declined 19.4% amid rising inflation and rate increases, Edison fell just 6.91%.

3. American Water Works -Traditional Utility With Natural Monopoly Status

Founded in 1886, New Jersey-based American Water Works has grown to become the largest water utility company in the U.S., and it demonstrates how stocks that are considered less exciting can perform exceptionally well in the long run. 

The company went public in 2008 and continued to grind higher, touching a high of $189 per share in December 2021. It declined in 2022 in line with the bear market and due to a drop in revenue, but it bounced back last year. While it may be a little early to get in now from a valuation perspective, any decline in its share price might present an opportunity to enter. 

American Water Works, which operates in about 1,600 communities in 14 states, including Georgia, Indiana, Hawaii, Kentucky, Maryland, Iowa, Tennessee, Virginia, and West Virginia, has been described as a “regulated monopoly,” or a “natural monopoly” as, in the areas it serves, it faces no competition and its prices are regulated by authorities. The company pays a dividend, with the yield currently at 2.28%.

4. Dominion Energy – A Giant Focusing on Growth Through Acquisitions

Dominion Energy is also one of the utility stocks to watch. The utility giant, which serves 7 million customers across 15 states, has a diversified portfolio of utility assets across electricity, wind, gas, and solar.

Its focus on strategic acquisitions has solidified its market position. According to Mergr, the company has made two acquisitions in the last five years. Dominion’s growing investments in renewable energy will help it capitalize on future clean energy demand, while maintaining its legacy of reliable service. Revenue growth has slowed in recent quarters. However, that was against tougher comparisons. Overall, revenue remains steady.

Dominion also features on the list of high-dividend utility stocks. The company boasts a strong dividend yield of over 5%, attracting income-oriented investors with a steady stream of cash returned annually. While not the flashiest stock in the sector, Dominion Energy offers income investors a blend of attractive dividends and a commitment to sustainable expansion.

5. NextEra Energy – Focus on Renewables Positions It for Future Growth

The world’s largest power producer by market capitalization, NextEra Energy is a frontrunner in clean energy in the U.S. and North America, with operations extending to 49 U.S. states and four Canadian provinces. 

NextEra also says it’s generating more wind and solar energy than any other business in the world. Its assets that are mostly within the renewable energy space, position it well for the future as the demand for renewable energy sources continues to rise. NextEra also has operations in oil and natural gas, but the majority of its projects are in the battery storage, wind, nuclear, and solar sectors. 

The company also pays a healthy dividend, with its annual dividend yield currently standing at over 3%. It has also raised its dividend each year for 29 years. Having touched its highest closing price of $88.94 at the end of 21, its price dropped in the last two years and currently trades at levels that may be attractive for entry.

6. Southern Company – Utility Stock for Income-Focused Investors

Southern Company, along with its subsidiaries, serves 9 million customers and businesses, and owns or operates 55 facilities across 15 states, including California, Georgia, Texas and Washington. The utility giant has more than 12,490 megawatts of generating capacity and it’s active in sectors such as wind, gas, solar, fuel cell and energy storage, providing investors with diversification. 

Its generous 4.06% dividend yield gives investors a steady stream of cash for those seeking reliable returns even during market downturns.

While some of the other companies on this list have seen their share prices post stronger gains, Southern Company’s share price increase is more of a slow burner, edging higher over the years after periods of consolidation. Though not the fastest-growing stock in the sector, Southern Company still offers a compelling package for income-focused investors.

7. Duke Energy – Diversified Power Company, Robust Dividend Play

Duke Energy is another utility powerhouse. Headquartered in North Carolina, Duke’s electric utilities serve 8.2 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. In addition, its natural gas division services 1.6 million customers in North Carolina, South Carolina, Tennessee, Ohio and Kentucky. The company, which operates in electric power and gas distribution, collectively owns 50,000 megawatts of energy capacity.

Duke is another utility stock with a robust annual dividend yield, coming in at over 4%. It also boasts a 13-year track record of consecutive increases, offering a dependable income in any economic environment. The company has experienced solid revenue growth in recent years, although its earnings per share have been less than impressive.

Duke’s diversified portfolio has seen it make moves in the renewable energy market, with wind, solar, hydroelectric, biopower and landfill gas projects in the pipeline.

8. National Grid – Above-Average Dividend at Attractive Valuations

National Grid is the first of two London-listed stocks on this list, an energy company traversing the Atlantic with operations in the U.K. and the U.S., mitigating risks associated with any single market.

In the U.K., National Grid owns the high-voltage electricity transmission network in England and Wales. Its National Grid Electricity Distribution division is the country’s largest electricity distribution network, serving almost 8 million customers. Meanwhile, in the U.S., its gas and electricity businesses supply customers directly, and it also runs electricity distribution networks in upstate New York and Massachusetts, and transmission facilities in upstate New York, Massachusetts, New Hampshire, and Vermont, as well as gas distribution networks across the U.S. Northeast.

With many investors eyeing U.K. stocks this year due to the fact they are considered cheap, National Grid, also given its very healthy, more than 5% dividend yield, offers an attractive proposition for investors seeking a utility stock at an attractive valuation.

9. Centrica – The Owner of British Gas Is Poised for a Turnaround

Centrica the leading gas supplier to U.K. consumers and businesses, and a significant electricity supplier. Formed after the break-up of British Gas in 1997, Centrica currently serves 10.3 million customers across the U.K., Ireland, North America, Scandinavia and the Netherlands and owns businesses such as British Gas, Bord Gáis, as well as other operations, including gas storage, low carbon energy generation, and North Sea oil and gas production.

Centrica had a tough few years, with several headwinds. However, it’s showing signs of life, with its share price up more than 4o% in the last 12 months. It also increased its interim dividend 33% after to 1.33 pence and said it will extend its share buyback program by £450 million ($565 million), after first-half earnings jumped, led by its British Gas unit. 

While it’s not the go-to choice for investors seeking stability, the stock may be attractive to those looking for a utility company that is both a turnaround story and a dividend play, with its current dividend yield of 2.43%. 

10. Sempra – Energy Infrastructure Giant Primed for Further Growth

Nestled amongst the giants of the utility sector, Sempra Energy is an energy infrastructure firm that serves about 40 million consumers worldwide. The San Diego-based company invests in, develops, and operates energy infrastructure across the U.S. and Mexico.

Sempra’s operations include electricity generation, transmission, and distribution, while it also operates in the storage, transportation, trading and distribution of natural gas. It’s also making moves in renewable energy generation, with what it describes as its three growth platforms in California, Texas and Sempra Infrastructure, which includes assets in Mexico, where it is involved in solar and wind production and lower-carbon fuels.

Sempra boasts a solid dividend yield of over 3%, delivering income to shareholders. While its shares have stalled slightly since 2022, given the economic environment of interest rate increases, the company has strong growth potential. 

How to Pick the Best Utility Stocks to Invest in

Assess the Company’s Finances

The first aspect to evaluate is the company’s finances. Look for financial stability and utility companies with consistent earnings, revenue growth and low debt.

In addition, the company’s history of dividend payments is another factor to consider, especially if you are looking for stocks that provide steady and consistent income. Overall, ensuring the company has a solid balance sheet is important.

Evaluate the Dividend

As mentioned above, dividends are a vital factor to consider, especially as many investors put cash into utility stocks due to their solid dividend payments.

Research the company’s dividend yield, dividend growth history, and payout ratios. Utility companies with consistently increasing dividends and sustainable payout ratios are the ones to consider.

Look at Sector Growth

One important factor to assess when choosing utility stocks to invest in is the outlook for the sector in which the company operates. This will help you identify companies positioned to outperform the broader industry and deliver higher returns.

With the growth of renewable energy and the ongoing transition to cleaner forms of energy, investors should look at how each company is reacting to the changing environment. Utilities with promising growth prospects, for example, those leading the shift towards renewables or expanding into new markets, have the potential for higher returns in the long run compared to stagnant companies.

Learn About Regulation

Regulation is another crucial factor in the utility sector. Search for companies that operate in countries with more favorable regulatory environments and solid infrastructure investment plans.

For example, investing in a company that provides gas to customers in a country looking to clamp down on using natural gas would definitely not be a prudent investment choice. With renewable energy being high on the agenda of governments around the world, assess the company’s commitment to renewable energy integration and future growth potential beyond traditional sectors.

Diversify Your Investments

When it comes to investing in general, a primary rule is to make sure you diversify your portfolio, and you should also abide by that rule when investing in utility stocks.

To mitigate risk, spread your investments across different sub-sectors within utilities, such as electricity, water, and natural gas.

Where to Get Utility Stock Tips

For further information and insights into utility stock picks, we recommend checking out AltIndex. 

AltIndex uses a variety of data sources, as well as artificial intelligence, to analyze data from across the internet and provide investment recommendations. For example, it downloads and analyses all impactful data related to a company’s performance, such as job postings, website traffic, customer satisfaction ratings, app downloads, social media followers, and other critical indicators. 

Over time, AltIndex tracks and compares the data to competitors to provide users with well-researched investment opportunities. Those opportunities are provided by alerts delivered to subscribers via the company’s easy-to-use dashboard, which also holds the data.

With over 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well as a range of other useful features.

Conclusion

With demand for the services of utility companies remaining solid no matter the economic circumstances, the steadiness of the utility sector offers a hedge during times of economic downturns and market upheavals. Utility stocks are considered a beacon of reliable returns and dependable dividends.

Whether you prioritize high dividend yields, growth potential in renewable energy, or geographic diversification, a well-chosen utility stock can steady your portfolio in choppy waters. Remember, consistency is a rare commodity in the stock market. While there are always risks, regardless of the investment type, utility stocks offer some degree of stability.

References

https://www.brookfield.com/our-businesses/renewable-power-transition

https://www.marketwatch.com/story/brookfield-asset-management-raises-30-billion-for-private-infrastructure-investments-101f8384

https://www.dominionenergy.com/our-company/operating-segments

https://www.macrotrends.net/stocks/charts/D/dominion-energy/revenue

https://mergr.com/dominion-energy-acquisitions

https://www.southernpowercompany.com/our-projects/our-project-map.html

https://www.centrica.com/who-we-are/

https://www.duke-energy.com/ourcompany/environment/renewable-energy

https://investors.duke-energy.com/overview/default.aspx

https://www.reuters.com/markets/companies/D.N

https://www.reuters.com/sustainability/climate-energy/over-110-countries-set-join-cop28-deal-triple-renewable-energy-2023-12-02/

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Agnes Lovasz

Editor

Agnes Lovasz

Editor

I am a London-based financial writer and editor with a goal to make complex ideas in finance and economics accessible to everyone through plain English storytelling and help people along on their investment journey. I have more than two decades of experience as a financial journalist, gained working for some of the world’s largest news organizations, including Bloomberg News, the Economist Group, investing.com, and in my investment writing business. I hold degrees in English language and literature, journalism and communications, international economics, and digital marketing. The latter was put to use in recent roles that included a financial copywriting stint…

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