Utilities have been one of the best-performing S&P 500 sectors in 2025, as market uncertainty drives investors to these relatively safe assets that typically offer decent dividends.
Because people and businesses need electricity, water and gas regardless of what the economy is doing, utilities are often considered defensive safe havens in times of economic uncertainty.
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“Think of utilities as a stable, low-risk investment,” says David Capablanca, host of “The Friendly Bear” podcast and co-founder of Conscious Trading Academy. “We all depend on basic necessities for our survival, so utilities will do well in all market conditions because they are the bare necessities of what we need to live our lives: water and power.”
The Morningstar US Utilities index is up more than 10% year to date, handily outperforming the near-flat S&P 500 index.
“Utilities have been a clear favorite among investors during the last few months as concerns around tariffs, inflation and recession pushed investors out of other sectors,” Morningstar said in a report this month.
With investors piling into the sector, there is the risk of near-term overvaluation — Morningstar says the sector is 7% overvalued on a median basis — but in the long term, several themes point to a bright future for utilities.
For one, after years of remaining relatively flat, electricity demand in the United States is expected to increase along with the development of power-hungry data centers to run artificial intelligence computing.
According to BloombergNEF, U.S. data-center power demand will more than double to 78 gigawatts by 2035.
Meanwhile, power demand is also expected to pick up as electric vehicles and the electrification of industries ramps up amid the energy transition away from fossil fuels.
“A large-scale transition to clean energy is underway, and those who actively invest in it can gain serious benefits in the future,” says Julia Khandoshko, CEO of broker Mind Money.
In addition to new nuclear and renewables generation, experts expect natural gas to remain a key player for decades as a “bridge fuel” amid declines in coal-fired generation.
Water is also key to the utilities space amid a growing and urbanizing population even as climate change puts supply at risk.
All that will require new utility infrastructure. For utilities, that also means profit they can recoup through rate increases over time after building it.
In addition to utilities providing life-sustaining products, Khandoshko points out another reason these companies are stable — they often have regulated revenue, which makes income predictable.
“Generation, distribution and transmission investments were all higher in 2024 versus 2023 as utilities ramp up capital expenditures to support data center buildouts, electrification and manufacturing onshoring,” the Morningstar report said.
With all the expected construction, Morningstar says securing supplies, equipment and labor for the projects could become a constraint. That would raise costs.
Another risk always hanging over utilities is that regulators won’t allow them to recoup as much money as they ask for. “Capital expenditures and regulatory restrictions can greatly affect profitability,” Khandoshko says.
Yet another risk to utility stock valuations is that rising interest rates on government debt could decrease their allure.
Still, Khandoshko says that many risks are already baked into the price for utility stocks, and the potential for a rate-cutting cycle this year would bode well for the sector. For investors interested in this bedrock, income-producing sector, here are seven of the best utility stocks to buy now:
| Utility stock | Dividend yield |
| NextEra Energy Inc. (ticker: NEE) | 3.3% |
| Duke Energy Corp. (DUK) | 3.6% |
| Eversource Energy (ES) | 4.7% |
| Dominion Energy Inc. (D) | 4.8% |
| Edison International (EIX) | 5.9% |
| Southern Co. (SO) | 3.3% |
| Brookfield Renewable Partners LP (BEP) | 6.2% |
NextEra Energy Inc. (NEE)
This company has a regulated utility segment that engages primarily in the generation, transmission, distribution and sale of electric energy in Florida. Another segment produces electricity from renewable sources, including wind and solar. The company is also involved with green hydrogen, battery storage and nuclear plants.
Morningstar points out that NextEra’s Florida unit has filed for 2026-2029 rates that would allow an 11.9% return. The research firm says its 11% return-on-equity expectations for the company would be among the industry’s highest.
Khandoshko calls NextEra “one of the leaders in clean energy in the USA, with strong growth potential.” NextEra Energy has a dividend yield of 3.3% and, according to Dividend.com, has increased its dividend for 31 consecutive years.
Duke Energy Corp. (DUK)
This “classic electric power company from the East Coast,” as Khandoshko puts it, serves more than 8 million electricity customers in the Carolinas, Florida, Indiana, Ohio and Kentucky. It also has a natural gas unit that services more than 1 million customers in North and South Carolina, Tennessee, Ohio and Kentucky.
Duke Energy is also one of the biggest nuclear utilities in the U.S., giving it more than a toehold in an industry expected to play a big role in decarbonizing the economy.
Nuclear energy is experiencing a renaissance after being shunned for years following a reactor disaster in Japan in 2011. Now, governments are embracing nuclear because it produces energy without greenhouse gas emissions and can provide a baseload of electricity when solar and wind farms aren’t producing.
The company is among Morningstar’s top utility stock picks, with the research firm saying it has a clear pathway to management’s 5% to 7% annual earnings growth target at the high end.
Duke has a dividend yield of 3.6% and, according to Dividend.com, it has increased its dividend for 20 consecutive years.
Eversource Energy (ES)
This utility provides electric, natural gas and water service in Massachusetts, Connecticut and New Hampshire. Eversource has more than 4 million customers.
“We think Eversource is too cheap for investors to ignore,” the Morningstar report says, pointing out that the company is trading at a depressed price-to-earnings ratio.
Cash flow timing delays that have weakened credit metrics in recent months should turn around this year after regulators approved more than $1 billion in deferred cost recovery, Morningstar says.
Although the company won’t likely benefit much from data center growth, it has ample investment opportunity to keep growing earnings at 6% annually, at least until 2028, the research firm says.
Eversource has a dividend yield of 4.7% and, according to Dividend.com, has increased its dividend for two straight years.
[Read: 8 Best Energy Stocks to Buy in 2025]
Dominion Energy Inc. (D)
This utility provides regulated electricity to more than 3 million homes and businesses in Virginia and the Carolinas, in addition to regulated natural gas service to 500,000 customers in South Carolina. Dominion is also a big nuclear player and has been developing regulated solar power and offshore wind generation.
“Dominion Energy can be an interesting bet for the future as they are actively switching to renewable sources, and their profitability is almost 5%, which is also encouraging,” Khandoshko says.
Dominion has a dividend yield of 4.8%.
Edison International (EIX)
This company’s subsidiary Southern California Edison serves about 15 million people in California. Edison International also has a global sustainability and energy advisory business.
Wildfire concerns in California have proved to be an overhang for the company. But Morningstar says the market is overestimating the worst-case scenario, as the research firm believes Edison will qualify for state-legislated insurance fund proceeds that will cover nearly all shareholder liabilities.
Pending the outcome of a 2025 to 2028 rate-case proceeding, Morningstar assumes the company will invest more than $7 billion over the next four years, supporting 7% average annual earnings growth.
“I’d say that if you’re looking for a deal, the parent company of Southern California Edison is currently the cheapest name on my top utilities list,” says Capablanca.
Edison International has a dividend yield of 5.9% and, according to Dividend.com, has increased its dividend for 23 consecutive years.
Southern Co. (SO)
Southern Co. owns electric and natural gas distribution utilities and provides wholesale energy, distributed energy solutions, fiber optics and wireless communications.
Its operations in Georgia, Alabama and Mississippi give it exposure to relatively healthy economies, population growth and amenable regulatory environments.
That last bit is especially important, as utilities make money by building or updating generation capacity and then recouping the money along with a profit from rate payers. So utilities that are located in jurisdictions with regulators that tend to approve project requests have an advantage.
The Morningstar report says Southern’s management may raise its five-year $63 billion investment plan in its midyear update.
Southern has a dividend yield of 3.3% and, according to Dividend.com, has increased its dividend for 25 consecutive years.
Brookfield Renewable Partners LP (BEP)
Brookfield Renewable Partners’ portfolio includes hydroelectric, wind and solar electric generating operations, as well as distributed energy and sustainable solutions spanning five continents.
“With operations spread across different areas, the company is in a strong place to take advantage of the world’s shift toward clean energy,” Capablanca says.
In the U.S., Morningstar says President Donald Trump’s pro-fossil fuel polices are unlikely to slow renewable energy growth as state-level energy policies remain the key driver.
U.S. renewable energy has topped coal-fired generation over the past 10 consecutive months through February, and renewables could pass nuclear generation as the second-largest source of power in the nation by the end of this year, the research firm says.
Brookfield has a dividend yield of 6.2% and, according to Dividend.com, has increased its dividend for two consecutive years.
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7 Best Utility Stocks to Buy for Dividends originally appeared on usnews.com
Update 05/30/25: This story was published at an earlier date and has been updated with new information.
