Two worries have been looming particularly large for stock market investors recently — a potential recession and the crisis among regional banks.
With those concerns sapping appetite for riskier investments, it’s not surprising that the traditional safe-haven sectors of consumer staples, health care and utilities have been the best-performing sectors in the S&P 500 over the last month.
Any solid portfolio will probably have a smattering of all three of those more-stable sectors, tilting more heavily toward them during times of uncertainty and less so during bullish times. The reason is simple — people need toothpaste and food, doctors and medicine, and electricity and water no matter what the economy is doing.
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Although their price may rise slowly and steadily, you’re not likely to want to buy utility stocks for price appreciation like you would a hot tech startup. But you’ll appreciate the steadiness these eight top utility stocks can bring to a portfolio in times of market turbulence — as well as the dividends they offer.
“Utilities should continue to be a desirable safe haven for a slowing economy and broader earnings disinflation,” says Todd Shaffer, manager of research at VectorVest.
| Utility stock | Dividend yield |
| Black Hills Corp. (ticker: BKH) | 3.8% |
| Spire Inc. (SR) | 4.2% |
| UGI Corp. (UGI) | 5.0% |
| Evergy Inc. (EVRG) | 3.9% |
| Idacorp Inc. (IDA) | 2.9% |
| Ameren Corp. (AEE) | 2.8% |
| Atmos Energy Corp. (ATO) | 2.5% |
| MGE Energy Inc. (MGEE) | 2.1% |
Black Hills Corp. (BKH)
John Robinson, cofounder of Nest Egg Guru, likes this South Dakota utility and the following three companies on this list because of factors including relatively low debt-to-capital and price-earnings ratios. They also all have a strong track record of raising their dividends.
“In terms of timing, all four of these companies are trading in the bottom half of their 52-week trading ranges, which, combined with (other) metrics, puts them squarely on my buy list,” Robinson says.
Black Hills provides more than 1.2 million customers with natural gas and electric utility services in addition to generating wholesale electricity and producing natural gas, crude oil and coal.
The company has raised its payout for 52 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility also has a 3.8% forward dividend yield.
Spire Inc. (SR)
This natural gas utility serves about 1.7 million customers in Mississippi, Missouri and Alabama.
In May, the company said it remained confident in its ability to grow its net economic earnings over the long term in part because of its planned capital investment, including $700 million in its 2023 fiscal year.
The company has raised its payout for 19 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility also has a 4.2% dividend yield.
[The Ultimate Guide to Dividend Stocks]
UGI Corp. (UGI)
Robinson says high natural gas prices and rising interest rates are likely reasons for the recently lower share price for Spire, UGI and Black Hills.
“However, none of this is sneaking up on anyone,” he says. “In my view, all of this is factored into the price of the stocks already.”
This Pennsylvania-based energy distribution and services company is a top pick for Robinson, in part because of its history of raising its dividend.
The company has raised its payout for 36 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility has a 5% dividend yield, putting it well ahead of the utility sector’s 3.75% average and allowing UGI to compete favorably against shorter-term Treasurys.
Current dividend yields make these four companies “surprisingly competitive with one- to three-year CD, Treasury and corporate bond yields, particularly after considering the lower federal income tax rates applied to qualified dividends vs. taxable interest,” Robinson says.
Evergy Inc. (EVRG)
This utility has about 1.7 million customers and operates in Kansas and Missouri. In 2022, the company invested $2.2 billion in electric infrastructure projects.
The company has raised its payout for 19 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility has a dividend yield of 3.9%.
“Investors seeking passive income that is competitive with current fixed-income rates and is likely to rise over time at a pace that is higher than inflation would do well to consider adding these four companies to a rising dividend stock portfolio,” Robinson says. “They are also trading low enough that it is reasonable to expect modest price appreciation over time.”
Idacorp Inc. (IDA)
The outright dividend amount, of course, isn’t the only factor for investors to consider when they’re thinking about buying a utility stock.
Desirable qualities for dividend income stocks also include solid earnings and sales growth rates to fund future dividend payments, and earnings yields in excess of the dividend yield and dividend growth rates, says Shaffer.
This electric utility and the following three companies all share those qualities, Shaffer says. They are all “buy” rated within VectorVest’s system, meaning they have fundamental strength and are in an upward price trend.
“We believe in buying stocks when they are rising,” Shaffer says.
The company has raised its payout for 11 consecutive years. The utility also has a 2.9% dividend yield.
[How to Analyze a Stock’s Dividend]
Ameren Corp. (AEE)
This St. Louis-based utility has 2.4 million electric customers and more than 900,000 natural gas customers through its Missouri and Illinois subsidiaries.
In April, the company received approval to acquire a 150-megawatt solar facility in Illinois. Earlier in the year it got the go-ahead to acquire a 200-megawatt solar installation in Missouri.
Adding renewable generation will become increasingly important for utilities amid the nationwide energy transition away from fossil fuels and toward renewable sources of energy.
Ameren has raised its dividend for 10 consecutive years. The utility also has a 2.8% forward dividend yield.
Atmos Energy Corp. (ATO)
This Dallas-based utility says it is the nation’s largest natural gas-only distributor. It has more than 3 million distribution customers in more than 1,400 communities in eight states.
Last year, the company invested $2.4 billion, with most of that going toward safety and reliability projects.
In the first quarter, the company raised the bottom end of its fiscal 2023 earnings guidance to $6 per share from $5.90 while keeping the top of the range the same at $6.10. It said its indicated dividend for the fiscal year is $2.96, an 8.8% increase from the previous fiscal year.
The company has raised its payout for 39 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility also has a 2.5% dividend yield.
MGE Energy Inc. (MGEE)
This Wisconsin-based utility holding company is the parent of Madison Gas and Electric Co., which provides natural gas and electric service in south-central and western Wisconsin.
The company recently received approval to buy 30 megawatts of solar energy and 16.5 megawatts of battery storage from a Dane County energy center as part of its goal of reducing its carbon emissions by at least 80% from 2005 levels by the end of this decade.
The company has raised its payout for 47 consecutive years, earning it an A+ rating for dividend safety from Dividend.com.
The utility has a 2.1% dividend yield.
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8 Best Utility Stocks to Buy for Dividends Now originally appeared on usnews.com
Update 05/10/23: This story was previously published at an earlier date and has been updated with new information.
