In this article, we discuss the 11 best utility stocks to buy now. You can skip our detailed analysis of the utility stocks and go directly to read the 5 Best Utility Stocks To Buy Now.
The utility sector includes the companies that provide basic services such as water, electricity, and natural gas. The industry is instrumental to our daily lives. However, the sector was negatively affected by the coronavirus crisis.
According to a report published by FutureBridge, a research company, in the first quarter of 2020, the global electricity demand fell 2.5%, compared with Q1 of 2019. Moreover, investors also favored technology, financial, and energy sectors, resulting in the underperformance of the utility sector. The S&P 500 Utilities Index fell 7% in 2020. However, with the robust vaccination process, the utility sector is rebounding to its pre-pandemic levels. According to a paper published by S&PGlobal, in the latter half of 2020, capital spending by the U.S. energy utilities stood at $130 billion, up from $121 billion in 2019.
According to the analysts, the investments in the utility sector tend to remain stable as the demand for these services always remains intact, even during a recession.
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In the first quarter of 2021, the utility sector remained one of the top-performing sectors in the S&P 500, as the sector gained 7.8% during the quarter, compared with a 4.9% gain of the broader market, according to a report published by Wall Street Journal. Moreover, the electricity demand has increased by 5% as compared with their pre-pandemic levels, offering lucrative opportunities for investors in the sector. Some of the most notable utility stocks include NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM).
Our Methodology:
Let’s analyze our list of the best utility stocks to buy now. We took into account hedge fund sentiment, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Utility companies that pay regular dividends were preferred.
Why pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by wide margins. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Utility Stocks To Buy Now
11. Chesapeake Utilities Corporation (NYSE:CPK)
Number of Hedge Fund Holders: 6
Chesapeake Utilities Corporation (NYSE:CPK) ranks eleventh on our list of the best utility stocks to buy now. It is an American energy company that specializes in the transmission and distribution of natural gas. Along with this, the company also specializes in the generation and distribution of electricity.
In August, Maxim lifted its price target on Chesapeake Utilities Corporation (NYSE:CPK) to $155, while keeping a ‘Buy’ rating on the shares. The firm’s analyst appreciated the company’s new energy delivery projects and expects its natural gas customers to grow by 5%, which would result in the company’s EPS growth.
As of Q2 2021, 6 hedge funds tracked by Insider Monkey have positions in Chesapeake Utilities Corporation (NYSE:CPK), valued at $6.4 million. The number of hedge funds having stakes in the company was the same in the previous quarter.
Like NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM), Chesapeake Utilities Corporation (NYSE:CPK) is also gaining investors’ attention in 2021.
10. Otter Tail Corporation (NASDAQ:OTTR)
Number of Hedge Fund Holders: 8
Otter Tail Corporation (NASDAQ:OTTR) is an American energy company that provides electricity and energy services. Founded in 1907, the company remains one of the best utility stocks to buy now.
Maxim’s analyst Tate Sullivan noted that Otter Tail Corporation (NASDAQ:OTTR) can benefit from the high demand for polyvinyl chloride pipes for the housing market as he lifts his estimates for the company’s FY21 EPS by $0.14. In September, the firm raised its price target on Otter Tail Corporation (NASDAQ:OTTR) to $67, while keeping a ‘Buy’ rating on the shares. In Q2 2021, Otter Tail Corporation (NASDAQ:OTTR) reported revenue of $285.6 million, showcasing a 48.2% year-over-year growth.
On August 11, the company’s board announced a quarterly dividend of $0.39 per share, in-line with the previous, paying an annual yield of 2.74%.
With shares worth $18.9 million, GAMCO Investors is the company’s leading shareholder.
9. CenterPoint Energy, Inc. (NYSE:CNP)
Number of Hedge Fund Holders: 20
CenterPoint Energy, Inc. (NYSE:CNP) is an American electric and natural gas utility company, which delivers electricity, natural gas, and power to its consumers.
Recently, CenterPoint Energy, Inc. (NYSE:CNP) entered into two power purchase agreements for an additional 335 MW of solar energy for its Indiana-based electric and natural gas business. The 335 MW of solar energy will supply electricity to over 70,000 homes in the area. In Q2 2021, CenterPoint Energy, Inc. (NYSE:CNP) posted an EPS of $0.36, beating the estimates by $0.11. For FY21, the company expects the utility EPS in the range of $1.25 to $1.27.
Recently, Barclays upgraded CenterPoint Energy, Inc. (NYSE:CNP) to ‘Overweight’ with a $30 price target, highlighting the company’s strong utility profile. On September 30, the company increased its dividend by 6.3% to $0.017 per share, yielding 2.77%, and has been increasing its dividend for the past two years.
Of the 873 hedge funds tracked by Insider Monkey, 20 hedge funds have positions in CenterPoint Energy, Inc. (NYSE:CNP) in Q2, compared with 25 in the previous quarter. The total value of these stakes is $287.7 million.
8. Evergy, Inc. (NYSE:EVRG)
Number of Hedge Fund Holders: 21
Evergy, Inc. (NYSE:EVRG), one of the best utility stocks to buy now, is an American utility company and the largest supplier of electricity in Kansas, U.S., where it serves over 1.6 million customers. The company’s generating capacity has reached 16,000 MW from its 40 power plants.
On September 20, Evergy, Inc. (NYSE:EVRG) signed an agreement with a broadband solutions company, Anterix, to use its 900 MHz broadband spectrum to deploy a wireless broadband communications network in Kansas and Missouri. In Q2 2021, Evergy, Inc. (NYSE:EVRG) posted an EPS of $0.85, beating the estimates by $0.12. The company’s revenue of $1.24 billion presented a 5.1% year-over-year growth.
This July, Seaport Global initiated its coverage on Evergy, Inc. (NYSE:EVRG) with a ‘Buy’ rating and a $68 price target.
As of Q2 2021, 21 hedge funds have positions in Evergy, Inc. (NYSE:EVRG), valued at $1.03 billion. The number of hedge funds having stakes in the company stood at 30 in the previous quarter. Paul Singer’s Elliot Management is the company’s largest shareholder, with shares worth $637 million.
Like NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM), investors and analysts are also paying attention to Evergy, Inc. (NYSE:EVRG).
7. UGI Corporation (NYSE:UGI)
Number of Hedge Fund Holders: 23
UGI Corporation (NYSE:UGI) is an American holding company that specializes in the distribution of natural gas and electric power.
This July, BofA upgraded UGI Corporation (NYSE:UGI) to ‘Buy’ with a $51 price target. The firm’s analyst Richard Ciciarelli noted that the company can benefit from its $1 billion investment in renewables as the market develops in the coming years. On August 4, the company declared a quarterly dividend of $0.345 per share, yielding 2.99%.
In fiscal Q3 2021, UGI Corporation (NYSE:UGI) posted an EPS of $0.13, beating the estimates by $0.06. The company reported revenue of $1.5 billion, up 25% from the prior-year quarter.
As of Q2 2021, 23 hedge funds tracked by Insider Monkey have positions in UGI Corporation (NYSE:UGI), up from 19 in the previous quarter. The total value of these stakes is $275.4 million. First Eagle Investment Management is the company’s leading shareholder with over 9 million shares.
6. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 33
NRG Energy, Inc. (NYSE:NRG) is an American integrated power company that generates electricity and also provides power and energy solutions to its consumers.
This June, Goldman Sachs lifted its price target on NRG Energy, Inc. (NYSE:NRG) to $57 and upgraded the stock to ‘Conviction Buy’. The firm’s analyst Michael Lapides expects a strong free cash flow in 2022, driven by the company’s retail business and resumption of its normal operations.
NRG Energy, Inc. (NYSE:NRG) pays an annual dividend of $1.30 per share, yielding 3.18%.
Of the 873 hedge funds tracked by Insider Monkey, 33 hedge funds have positions in NRG Energy, Inc. (NYSE:NRG) in Q2, compared with 35 in the previous quarter. The total value of these stakes is over $1.9 billion.
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Disclosure. None. 11 Best Utility Stocks to Buy Now is originally published on Insider Monkey.
