15 Best Utility Stocks to Invest In

Published on July 31, 2021 at 10:02 am by Ma’k Almario in Hedge Funds, News

In this article, we discuss the 15 best utility stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Utility Stocks to Invest In.

The utility sector is among the many industries that endured the financial distress caused by the COVID-19 virus. According to Deloitte data, overall energy demand has decreased but did not slump during the pandemic peak. The need for energy in the industrial sector went down as the manufacturing industry has halted. In contrast, the demand for power in the residential sector has increased due to individuals having been ordered to stay at home to prevent coronavirus spread.

With the vaccine rollout, the utility sector continues to overcome the effects of the COVID-19 recession, as the economy shows an increase in activity in both commercial and residential markets, which appears to support the utilities. According to the U.S. Energy Information Administration, the country’s electricity consumption fell 3.9% in 2020 but is expected to rise 2.8% in the second quarter of 2021, owing primarily to progressive economic improvement.

Should You Invest in Utility Stocks?

In a recent market report, the global utility industry was valued at $4.23 trillion in 2020 and is anticipated to grow at a compound annual rate of 7.2% to $4.53 trillion in 2021. According to an analysis from S&P Global Market Intelligence, the energy sector is one of the industries that will recover the most in the first quarter of 2022.

Analysts are bullish on major utility stocks because of the long-term returns they offer, even though high-growth tech stocks are gaining traction during the economic recovery. Erik Oros, the chief investment officer of Gideon Strategic Partners, finds bargains in companies with exposure to liquefied natural gas and those focused on renewable energy. For example, Strategic Wealth Partners wealth advisor Joe Rudnicki is bullish on renewable energy firm NextEra Energy, Inc. (NYSE:NEE). The Florida-based energy giant engages in building energy infrastructure and the development of renewable energy. Shares of NextEra Energy, Inc. (NYSE:NEE) gained 11% in the last year.

Another utility stock investors are watching is Dominion Energy, Inc. (NYSE:D). The Virginia-based utility company supplies electricity to over 7 million customers worldwide. The company operates offshore wind projects. Credit Suisse analyst Michael Weinstein is bullish on Dominion Energy, Inc. (NYSE:D). According to the analyst, approximately $8 billion in regulated offshore wind, further land-based renewables, transportation electrification, and robust customer and data center expansion in Virginia drive the company’s large-cap regulated growth story for the next decade. In the first quarter of 2021, Dominion Energy, Inc. (NYSE:D) reported operating earnings of $893 million, increasing from $788 million year over year. Shares of Dominion Energy, Inc. (NYSE:D) jumped 3% in the previous month.

Wall Street is also optimistic about Entergy Corporation’s (NYSE:ETR) stock price in the future, with S&P Global Market Intelligence estimating a 12-month price objective of $117.56. The New Orleans-based utility company supplies electricity to over 3 million customers across Louisiana, Texas, Arkansas, and Mississippi. Shares of Entergy Corporation (NYSE:ETR) increased 5% in the previous month. On April 29th, Wells Fargo analyst Neil Kalton raised Entergy Corporation’s (NYSE:ETR) price target to $119 from $105 and kept its Overweight rating on the stock, stating that Entergy Corporation is one of his most brilliant concepts about relative worth.

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Investing is becoming difficult by the day, even for smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 more than 124 percentage points since March 2017. Between March 2017 and May 29th, 2021, our monthly newsletter’s stock picks returned 206.8%, vs 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Insider Monkey tracks data for about 866 hedge funds, which we have used to pick the best utility stocks among the most popular hedge funds. We also chose stocks with a positive analyst rating, solid fundamentals, and growth catalysts.

With this context, and industry outlook in mind, let’s now take a look at the 15 best utility stocks to invest in.

Best Utility Stocks to Invest In

15. Eversource Energy (NYSE:ES)

Number of Hedge Fund Holders: 24

We start our list of the best utility stocks to invest in Eversource Energy (NYSE:ES). The Massachusetts-based company distributes its energy through non-renewable and renewable sources. Eversource Energy (NYSE:ES) distributes to over 3.6 million Connecticut, Massachusetts, and Hampshire customers.

In May, Barclays analyst Eric Beaumont kept its Equal Weight rating on Eversource Energy (NYSE:ES) and raised the price target to $93 from $90 per share, stating that utilities are still inexpensive compared to broader stocks.

Last year, Eversource Energy (NYSE:ES) acquired utility company Columbia Gas in a $1.1 billion deal. The acquisition raised its customer base to 600,000 in 110 communities. Shares of Eversource Energy (NYSE:ES) increased 7% in the past month.

The company has a market cap of $29.6 billion and offers a dividend yield of 2.80%. In the first quarter of 2021, Eversource Energy (NYSE:ES) missed the estimated EPS of $1.09 and reported a $1.06 EPS. The company’s revenue in the first quarter came in at $2.83 billion, beating consensus estimates of $2.58 billion.

By the end of the first quarter of 2021, 24 hedge funds out of the 866 tracked by Insider Monkey held stakes in Eversource Energy (NYSE:ES), worth roughly $421 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), Eversource Energy (NYSE:ES) is one of the best utility stocks to invest in, according to market analysts.

14. DTE Energy Company (NYSE: DTE)

Number of Hedge Fund Holders: 26

DTE Energy Company (NYSE:DTE) ranks 14th on the 15 best utility stocks to invest in. The Michigan-based diversified energy company distributes electricity to over 2.2 million customers. The company also utilizes coal, natural gas, and nuclear fuel to supply over 11,084 megawatts of electricity.

Barclays analyst Eric Beaumont reinstated DTE Energy Company (NYSE:DTE) with an Equal Weight rating and a $125 price target on July 14th, stating that DTE’s stock price represents the new regulated business profile.

The company has a market cap of $22.54 billion and offers a dividend yield of 2.84%. In the first quarter of 2021, DTE Energy Company (NYSE:DTE) reported an operating EPS of $2.44, beating consensus estimates of $2.17. The company’s earnings in the first quarter came in at $397 million, increasing from $340 million in the same period of 2020.

By the end of the first quarter of 2021, 26 hedge funds out of the 866 tracked by Insider Monkey held stakes in DTE Energy Company (NYSE:DTE), worth roughly $205 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), DTE Energy Company (NYSE:DTE) is one of the best utility stocks to invest in, according to market analysts.

13. Sempra Energy (NYSE: SRE)

Number of Hedge Fund Holders: 27

Sempra Energy (NYSE:SRE) ranks 13th on the 15 best utility stocks to invest in. The California-based energy company provides the natural and electric gas infrastructure in the US and Mexico. Including its 840,000 natural gas meters in San Diego and southern Orange counties. Sempra Energy (NYSE:SRE) has over 36 million customers worldwide.

This year, the company sold 20% interest of Sempra Infrastructure Partners to New York-based investment company KKR in a $3.37 billion deal. The stock has gained 2.60% year to date.

In April, Mizuho analyst Anthony Crowdell upgraded Sempra Energy (NYSE:SRE) to a Buy rating with a price target of $148, up from $129 per share. According to the analyst, following the company’s 20% sale of Sempra Infrastructure Partners, SRE will utilize the profits for their California and Texas utilities.

The company has a market cap of $41.19 billion. In the first quarter of 2021, Sempra Energy (NYSE:SRE) had an EPS of $2.95, beating estimates by $2.71. The company’s first-quarter earnings came in at $874 million, up from $760 million in the same period of 2020.

By the end of the first quarter of 2021, 27 hedge funds out of the 866 tracked by Insider Monkey held stakes in Sempra Energy (NYSE:SRE), worth roughly $596 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), Sempra Energy (NYSE:SRE) is one of the best utility stocks to invest in, according to market analysts.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Sempra (NYSE: SRE). Here is what the fund said:

“Over the last year we have increased our exposure to utilities and during the quarter we continued to build out our position in Sempra. We added to utilities during the depths of the pandemic as their stocks sold off despite the defensive nature of their businesses. In a world of uncertainty, utilities offered predictable results with an attractive entry point. Our investment thesis in utilities, however, is not merely defensive; we believe utilities are one of the best ways to capitalize on the energy transition as the world decarbonizes and electrifies. As we move to electric vehicles and renewable power, the world will see tremendous investment in electric infrastructure. Utilities will build the grids of the future and this investment should drive attractive earnings growth for decades. We have focused our utilities investments in states with aggressive green policy initiatives that will drive strong growth.”

12. CMS Energy Corporation (NYSE: CMS)

Number of Hedge Fund Holders: 28

CMS Energy Corporation (NYSE:CMS) ranks 12th on the 15 best utility stocks to invest in. The Michigan-based energy company distributes electricity and natural gas to over 6 million customers in Michigan. The company was founded in 1886 and also supports power generation plants worldwide.

Earlier this month, CMS Energy Corporation (NYSE:CMS) announced its 2025 plans to be one of the first utility companies in the country to go coal-free. Shares of CMS Energy Corporation (NYSE:CMS) rose 3.45% in the past month.

CMS Energy Corporation (NYSE:CMS) was upgraded to Overweight and given a $67 price target by analysts in KeyBanc on July 26th. Analyst Sophie Karp sees potential in the company with its above-average regulatory structure and growth possibilities.

The company has a market cap of $17.97 billion and offers a dividend yield of 2.80%. In the first quarter of 2021, CMS Energy Corporation (NYSE:CMS) adjusted EPS of $1.21, beating estimates by $1.14. At the end of the first quarter, the revenue of CMS Energy Corporation (NYSE:CMS) came in at $2.08 billion, beating consensus estimates of $2.06 billion.

At the end of Q1 2021, 28 hedge funds tracked by Insider Monkey have CMS Energy Corporation (NYSE:CMS), worth $955 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), CMS Energy Corporation (NYSE:CMS) is one of the best utility stocks to invest in, according to market analysts.

Miller/Howard Investments, in its Q1 2021 investor letter, mentioned CMS Energy Corporation (NYSE: CMS). Here is what the fund said:

“We added CMS Energy Corp. (CMS), a name poised to benefit from above-average earnings growth. We initiated a position in this high-quality utility after a period of relative weakness in which its premium to the group narrowed.”

11. American Water Works Company, Inc. (NYSE: AWK)

Number of Hedge Fund Holders: 30

American Water Works Company, Inc. (NYSE:AWK) ranks 11th on the 15 best utility stocks to invest in. The public utility company headquartered in New Jersey operates water and wastewater utilities in over 16 US states.

On May 19th, American Water Works Company, Inc. (NYSE:AWK) has announced its $2.7 million investment in its Illinois water system. The investment will cover the rehabilitation of 6 water plants and replace 3,300 feet of water main. American Water Works Company, Inc.’s (NYSE:AWK) share rose 15.89% over the last twelve months.

Barclays analyst Eric Beaumont raised American Water Works Company, Inc.’s (NYSE:AWK) price target to $170 from $154 in May and kept its Equal Weight rating, stating that the gap for undervalued utility companies is closing.

The company has a market cap of $30.35 billion and offers a dividend yield of $1.44. The company’s EPS in the first quarter of 2021 came in at $0.73, meeting consensus estimates. American Water Works Company, Inc.’s (NYSE:AWK) revenue in the first quarter of 2021 came at $888 million, beating consensus estimates of $847.04 million.

As of Q1 2021, 30 hedge funds tracked by Insider Monkey have positions in American Water Works Company, Inc. (NYSE:AWK) worth $1.10 billion.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), American Water Works Company, Inc. (NYSE:AWK) is one of the best utility stocks to invest in, according to market analysts.

10. Entergy Corporation (NYSE: ETR)

Number of Hedge Fund Holders: 31

Entergy Corporation (NYSE:ETR) ranks 10th on the 15 best utility stocks to invest in. The energy firm based in New Orleans distributes electricity to over 3 million customers. The company engages in electric power production and retail distribution in Arkansas, Louisiana, Mississippi, and Texas.

On April 29th, Wells Fargo analyst Neil Kalton raised Entergy Corporation’s (NYSE:ETR) price target to $119 from $105 and kept its Overweight rating on the stock, stating that Entergy Corporation is one of his most brilliant concepts about relative worth.

The company has a market cap of $20.62 billion and offers a dividend yield of 3.70%. In the first quarter of 2021, Entergy Corporation (NYSE:ETR) had an adjusted EPS of $1.47, beating estimates by $1.16. In the first quarter, the company’s earnings were $335 million, increasing from $297 in the same period of 2020. The stock has gained 2% year to date.

At the end of the first quarter of 2021, 31 hedge funds in the database of Insider Monkey held stakes worth $857 million in Entergy Corporation (NYSE:ETR).

9. Duke Energy Corporation (NYSE: DUK)

Number of Hedge Fund Holders: 34

Duke Energy Corporation (NYSE:DUK) ranks 9th on the 15 best utility stocks to invest in. The North Carolina-based electric power company markets natural gas. Duke Energy Corporation (NYSE:DUK) supplies electric services to over 840,000 customers and natural gas to over 525,000 customers.

On July 26th, Duke Energy Florida announced expansion plans of 10 new solar power plants which are expected to be completed by the end of 2024. Duke Energy Corporation (NYSE:DUK) soared 28% year to date.

Argus analyst Gary Hovis upgraded Duke Energy Corporation (NYSE:DUK) to a Buy rating from a Hold rating with a price target of $106 per share. The analyst mentioned that the company’s dividend yield makes the stock attractive in the low-interest rate industry.

The company has a market cap of $80.36 billion. In the first quarter of 2021, Duke Energy Corporation (NYSE:DUK) adjusted EPS of $1.26, beating estimates by $1.20. The company’s first-quarter revenue came in at $6.15 billion, missing revenue estimates by $6.19 billion. However, the company affirmed a long-term growth rate of 5-7% off the 2021 midpoint.

There were 34 hedge funds that reported owning stakes in Duke Energy Corporation (NYSE:DUK) at the end of the first quarter. The total value of these stakes at the end of Q1 is $602 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), Duke Energy Corporation (NYSE:DUK) is one of the best utility stocks to invest in, according to market analysts.

8. NRG Energy Inc. (NYSE: NRG)

Number of Hedge Fund Holders: 35

NRG Energy Inc. (NYSE:NRG) ranks 8th on the 15 best utility stocks to invest in. The Texas-based American energy company became an independent company in the 2000s. The company was founded in 1992 and generates electricity for over 3.7 million US and Canadian provinces.

In June, Goldman Sachs analyst Michael Lapides upgraded NRG Energy Inc. (NYSE:NRG) to a Conviction Buy rating from a Buy rating and raised the price target to $57 from $46. The analyst commented that he anticipates robust growth out of the year 2022.

The company has a market cap of $10.03 billion and offers a dividend yield of 3.17%. In the first quarter of 2021, NRG Energy Inc. (NYSE:NRG) had an EPS of $0.33, beating estimates by $0.13. The company’s revenue in the first quarter was $8.09 billion, beating consensus estimates of $3 billion. NRG Energy Inc. (NYSE:NRG) has gained 21% year to date.

There were 35 hedge funds that reported owning stakes in NRG Energy Inc. (NYSE:NRG) at the end of the first quarter. The total value of these stakes at the end of Q1 is $1.60 billion.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), NRG Energy Inc. (NYSE:NRG) is one of the best utility stocks to invest in, according to market analysts.

7. Southern Company (NYSE: SO)

Number of Hedge Fund Holders: 35

Southern Company (NYSE:SO) ranks 7th on the list of 15 best utility stocks to invest in. The Georgia-based gas and electric holding company distribute energy and natural gas to over 9 million customers in seven states.

Southern Company (NYSE:SO) recently received approval from the Illinois Commerce Commission for its Nicor Gas Interconnection Pilot program. Shares of SO soared 17% year to date.

On May 25th, Barclays analyst Eric Beaumont raised Southern Company’s (NYSE:SO) price target to $76 per share from $70 previously and kept an Overweight rating.

The company has a market cap of $67.6 billion. The company’s first-quarter EPS was $0.98, beating consensus EPS of $0.83. Southern Company’s (NYSE:SO) revenue was $5.91 billion, beating consensus estimates of $5.49 billion.

By the end of the first quarter of 2021, 35 hedge funds out of the 866 tracked by Insider Monkey held stakes in Southern Company (NYSE:SO), worth roughly $464 million.

Just like NextEra Energy, Inc. (NYSE:NEE), Dominion Energy, Inc. (NYSE:D), and Entergy Corporation (NYSE:ETR), Southern Company (NYSE:SO) is one of the best utility stocks to invest in, according to market analysts.

6. Dominion Energy, Inc. (NYSE: D)

Number of Hedge Fund Holders: 39

Ranking 6th in the list of best utility stocks to invest in is power and energy company Dominion Energy, Inc. (NYSE:D). The Virginia-based utility company supplies energy to over 7 million customers worldwide. The company’s customer base includes North Carolina, West Virginia, Ohio, Pennsylvania, and Uta.

Scotiabank analyst Andrew Weisel upgraded Dominion Energy, Inc. (NYSE:D) to an Outperform rating from a Sector Perform and raised the price target to $92 from $88. The analyst mentioned that the visibility of the stock is one of the highest in the industry. Dominion Energy, Inc. (NYSE:D) was also given an Outperform rating by Scotiabank, with a $92 price target.

The company has a market cap of $60.75 billion. In the first quarter of 2021, Dominion Energy, Inc. (NYSE:D) had an operating EPS of $1.09, beating estimates by $0.02. The company’s first-quarter operating earnings were $893 million, increasing from $788 million year over year.

At the end of the first quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.29 billion in Dominion Energy, Inc. (NYSE:D).

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