Updated on October 30th, 2023
Utilities are often a favorite of dividend growth investors as they can provide high income.
Companies in this sector can do so because they often hold regulatory-based competitive advantages limiting competition. Utilities can typically apply and receive approval for rate base increases as they make upgrades and investments in their infrastructure. This can lead to dependable cash flows that then be distributed to shareholders in the form of dividends.
As such, many utility stocks typically have dividend yields that are several times that of the average stock in the S&P 500 Index.
Because of these favorable industry characteristics, we’ve compiled a list of utility stocks. The list is derived from the major utility sector exchange-traded funds JXI, VPU, and XLU.
You can download the list of all utility stocks (along with important financial ratios such as dividend yields and payout ratios) by clicking on the link below:
Electric utilities are one of the most common types in the sector, as these companies provide energy to consumers that are needed daily.
Most electricity consumption in the U.S. is due to lighting, appliances, heating, ventilation, and air conditioning. But besides powering homes, businesses, and industrial facilities, electricity will be needed to meet the rising demand from the increased adoption of electric vehicles.
This article will examine 10 of our favorite electric utility names, ranked in order of potential returns over the next five years.
Table of Contents
- Top Utility Stock #10: Portland General Electric (POR)
- Top Utility Stock #9: Allete, Inc. (ALE)
- Top Utility Stock #8: Otter Tail Corporation (OTTR)
- Top Utility Stock #7: Black Hills Corporation (BKH)
- Top Utility Stock #6: Evergy Inc. (EVRG)
- Top Utility Stock #5: UGI Corp. (UGI)
- Top Utility Stock #4: Brookfield Renewable Partners LP (BEP)
- Top Utility Stock #3: Algonquin Power & Utilities (AQN)
- Top Utility Stock #2: Eversource Energy (ES)
- Top Utility Stock #1: NextEra Energy Partners LP (NEP)
Top Utility Stock #10: Portland General Electric Company (POR)
- 5-year expected annual returns: 13.7%
Portland General Electric is an electric utility based in Portland, Oregon, providing electricity to more than 900,000 customers in 51 cities. The company owns or contracts more than 3.3 gigawatts of energy generation, between gas, coal, wind & solar, and hydro.
Source: Investor Presentation
The company is diversified by customer, with 52% of retail deliveries going to residential customers, 33% to commercial clients, and 14% to industrial clients. The company is forecasting that 80% of its power delivered to customers by 2030 will be carbon free, and 100% carbon free by 2040.
Portland General reported third quarter 2023 results on October 27th, 2023. Portland General reported net income of $47 million for the third quarter. The company earned $0.46 per diluted share on a GAAP basis, compared to $0.65 in Q3 2022. Retail energy deliveries in Q3 increased 2.6% compared to the same prior year period. This increase was driven by growth in residential, commercial, and industrial demand.
Click here to download our most recent Sure Analysis report on Portland General Electric Company (preview of page 1 of 3 shown below):
Top Utility Stock #9: Allete, Inc. (ALE)
- 5-year expected annual returns: 14.1%
ALLETE is an electric services company which operates primarily in the upper Midwest and invests in transmission infrastructure and other energy-related businesses. ALLETE owns Minnesota Power electric utility which serves over 145,000 residents in 15 municipalities and certain large industrial customers. ALLETE’s other businesses include BNI Energy, ALLETE Clean Energy, Superior Water, Light and Power and ALLETE Renewable Resources.
ALLETE reported second quarter 2023 results on August 8th, 2023. ALLETE reported consolidated earnings of $0.90 per share, a 34% increase compared to $0.67 earned in Q2 2022. The corporation’s regulated operations segment generated net income of $37.8 million, while the clean energy segment reported net income of just $3.1 million.
Click here to download our most recent Sure Analysis report on Allete, Inc. (preview of page 1 of 3 shown below):
Top Utility Stock #8: Otter Tail Corporation (OTTR)
- 5-year expected annual returns: 14.9%
Otter Tail Corporation goes back to 1907 with its electric utility. The company eventually expanded into metal fabrication and plastics manufacturing and today, it generates over $1 billion in annual revenue split between utility, manufacturing and plastics operations.
On August 1st, 2023, Otter Tail Power released its Q2 financial results. The company reported Q2 GAAP EPS of $1.95, surpassing expectations by $0.50. Despite a year-over-year decrease of 15.5% in revenue to $338 million, the revenue still exceeded estimates by $12.77 million.
The company has revised its 2023 diluted earnings per share guidance upwards, now expecting a range of $5.70 to $6.00, compared to the previous range of $4.55 to $4.85, with consensus at $4.74. The increase in earnings guidance is attributed to stronger-than-expected performance in the Plastics segment during the second quarter, which is anticipated to continue throughout the year.
The company’s earnings mix for 2023 is projected to be around 35% from the Electric segment and 65% from the Manufacturing and Plastics segments, adjusted for corporate costs, deviating from their long-term expected earnings mix due to the anticipated elevated earnings from the Plastics segment this year.
Click here to download our most recent Sure Analysis report on OTTR (preview of page 1 of 3 shown below):
Top Utility Stock #7: Black Hills Corporation (BKH)
- 5-year expected annual returns: 15.0%
Black Hills Corporation is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming.
The company has 1.33 million utility customers in eight states. Its natural gas assets include 47,000 miles of natural gas lines. Separately, it has ~9,000 miles of electric lines and 1.4 gigawatts of electric generation capacity.
Source: Investor Presentation
In the 2023 second quarter, revenues of $410 million declined 13% year-over-year and missed the consensus estimate by $50 million. Earnings-per-share of $0.35 was slightly below the consensus analyst estimate. The utility forecasts earnings-per-share of $3.65 to $3.85 for the current fiscal year.
Utilities like Black Hills are resistant to recessions as demand for electricity and gas is not very cyclical. Black Hills should remain profitable under most circumstances. The fact that customers tend to stick with their provider means that Black Hills operates a relatively stable business model.
Click here to download our most recent Sure Analysis report on BKH (preview of page 1 of 3 shown below):
Top Utility Stock #6: Evergy Inc. (EVRG)
- 5-year expected annual returns: 16.9%
Evergy is an electric utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Through its subsidiaries Evergy Kansas, Evergy Metro and Evergy Missouri West, the company serves approximately 1.4 million residential customers, nearly 200,000 commercial customers and 6,900 industrial customers and municipalities in Kansas and Missouri.
In early August, Evergy reported (8/4/23) financial results for the second quarter of fiscal 2023. The company benefited from increased weather-normalized demand, lower maintenance and operating costs and higher transmission margin but it was hurt by unfavorable weather, higher interest expense and depreciation. As a result, its adjusted earnings-pershare dipped -4% over the prior year, from $0.84 to $0.81.
Click here to download our most recent Sure Analysis report on Evergy Inc. (preview of page 1 of 3 shown below):
Top Utility Stock #5: UGI Corporation (UGI)
- 5-year expected annual returns: 17.8%
UGI is an electric and gas utility company that operates in Pennsylvania, in addition to a large energy distribution business that serves the entire U.S. and other parts of the world. The company has four segments: AmeriGas, UGI International, Midstream & Marketing, and UGI Utilities.
On August 2nd, 2023, UGI reported its Q3 results. The quarter saw GAAP diluted earnings per share (“EPS”) of $(3.76) and adjusted diluted EPS of $0.00, contrasting with GAAP diluted EPS of $(0.03) and adjusted diluted EPS of $0.06 in the prior-year period. Year-to-date figures revealed GAAP diluted EPS of $(7.78) and adjusted diluted EPS of $2.81 compared to GAAP diluted EPS of $3.84 and adjusted diluted EPS of $2.90 in the prior-year period.
The year-to-date reportable segments earnings before interest expense and income taxes (“EBIT”) stood at $1,076 million, nearly on par with the prior-year period’s $1,079 million.
Click here to download our most recent Sure Analysis report on UGI Corporation (preview of page 1 of 3 shown below):
Top Utility Stock #4: Brookfield Renewable Partners LP (BEP)
- 5-year expected annual returns: 18.1%
Brookfield Renewable Partners L.P. operates one of the world’s largest portfolios of publicly traded renewable power assets. Its portfolio consists of about 31,300 megawatts of capacity in North America, South America, Europe, and Asia.
Brookfield Renewable Partners is one of four publicly traded listed partnerships that are operated by Brookfield Asset Management (BAM). The others are Brookfield Infrastructure Partners (BIP) and Brookfield Business Partners (BBU).
In early August, BEP reported (8/4/23) financial results for the second quarter of fiscal 2023. Its funds from operations (FFO) per unit grew 4%, from $0.46 to $0.48, thanks to strong hydro generation, high power prices and acquisitions.
BEP is resilient to the inflationary environment prevailing right now, as about 70% of its contracts are indexed to inflation.
Click here to download our most recent Sure Analysis report on BEP (preview of page 1 of 3 shown below):
Top Utility Stock #3: Algonquin Power & Utilities Corporation (AQN)
- 5-year expected annual returns: 19.3%
Algonquin Power & Utilities is a power and utility company based in Canada. Its regulated utilities are diversified across natural gas, electric, and water. It anticipates to use the proceeds from the sale of the renewable portfolio for debt reduction and share repurchases.
For the 2023 second quarter, revenue rose 1% to $627.9 million, adjusted net earnings declined 49% to $56.2 million, and adjusted earnings-per-share (“EPS”) fell 50% to $0.08. And its adjusted EBITDA, a cash flow proxy, fell 4% to $277.7 million, against Q2 2022. Its regulated utilities segment did well with operating profit climbing 10% to $255.3 million year over year.
Click here to download our most recent Sure Analysis report on AQN (preview of page 1 of 3 shown below):
Top Utility Stock #2: Eversource Energy (ES)
- 5-year expected annual returns: 21.0%
Eversource Energy is a diversified holding company with subsidiaries that provide regulated electric, gas, and water distribution service in the Northeast U.S. The company’s utilities serve more than 4 million customers after acquiring NStar’s Massachusetts utilities in 2012, Aquarion in 2017, and Columbia Gas in 2020.
Eversource has a long history of generating steady growth over time.
Source: Investor Presentation
On July 31st, 2023, Eversource Energy released its second quarter 2023 results for the period ending June 30th, 2023. For the quarter, the company reported revenue of $2.63 billion, a decrease of 8.9% compared to $2.88 billion in the same quarter of last year.
The company reported earnings of $15 million and earnings-per-share of $0.04 compared with earnings of $292 million and earnings-per-share of $0.84 in the prior year.
Click here to download our most recent Sure Analysis report on ES (preview of page 1 of 3 shown below):
Top Utility Stock #1: NextEra Energy Partners (NEP)
- 5-year expected annual returns: 31.8%
NextEra Energy Partners was formed in 2014 as Delaware Limited Partnership by NextEra Energy to own, operate, and acquire contracted clean energy projects with stable, long-term cash flows. The company’s strategy is to capitalize on the energy industry’s favorable trends in North America of clean energy projects replacing uneconomic projects.
NextEra Energy Partners operates 34 contracted renewable generation assets consisting of wind and solar projects in 12 states across the United States. The company also operates contracted natural gas pipelines in Texas which accounts for about a fifth of NextEra Energy Partners’ income.
Source: Investor Presentation
On July 25th, 2023, NextEra Energy, Inc. posted its second-quarter financial results. The partnership reported a GAAP EPS of $0.53, missing expectations by $0.23. Revenue for the quarter was $350 million, which is a decrease of 3.3% compared to the previous year and missed expectations by $39.46 million.
Click here to download our most recent Sure Analysis report on NEP (preview of page 1 of 3 shown below):
The need for electricity isn’t going away significantly as the popularity and growth of electric vehicles accelerate. Combining this need with the typical uses of electricity and those utility companies focused on this area of power generation should have further growth ahead due to rising demand.
Utility stocks can make significant income-generating positions because of their generally stable business models that allow for generous dividend yields.
While not all stocks listed in this article have a buy rating, they all have at least a high single-digit total return potential and very safe dividend yields. Investors looking for exposure to the utility sector and reliable income could do well adding these names to their portfolios.
If you’re willing to venture outside of the utility industry for investment opportunities, the following Sure Dividend databases are very useful:
- The Dividend Aristocrats: dividend growth stocks with 25+ years of consecutive dividend increases
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 45 stocks with 50+ years of consecutive dividend increases.
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The 20 Highest Yielding Monthly Dividend Stocks: Monthly dividend stocks with the highest current yields.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.