In this article, we discuss the 16 best utility stocks to buy now. If you prefer to skip our detailed analysis of the utility sector, go directly to the 5 Best Utility Stocks To Buy Now.
The utility sector is one of the largest sectors of the U.S. equity market, boasting a collective market capitalization of $1.52 trillion. This sector primarily consists of electric, natural gas, and water companies. The utility stocks represent 2.88% of the market weight. As a result, the utility sector is attractive to invest in. As we reported in October 2022, utility stocks were on track to strongly outperform the broader market in 2022. By the end of the year, the S&P 500 utility sector was down by just 0.5% for the year, compared to a 19% decline for the S&P 500 index.
Utility stocks are known for their low price volatility and stable dividends. Utilities tend to perform better than most sectors in economic downturns or recession.
Some of the best utility stocks to consider are Exelon Corporation (NASDAQ:EXC), Duke Energy Corporation (NYSE:DUK), and American Water Works Company Inc. (NYSE:AWK).
The U.S. economy cannot function without the services of utility companies. Apart from supporting almost every critical infrastructure of the economy, the utility sector also employs many people. More than 962,650 people work in the U.S. utility sector.
The future looks promising for utility companies with the growing population and increasing economic activities. The U.S. utility revenue is on track to hit $1.1 trillion by 2025 from $993 billion in 2020.
Our Methodology
We scanned Insider Monkey’s database of 943 hedge funds’ holdings and picked top 16 utility stocks with the highest number of hedge fund investors. That means the stocks listed in the article are some of the best utility stocks to buy, according to hedge funds.
Best Utility Stocks To Buy Now
16. Xcel Energy Inc. (NASDAQ:XEL)
Market cap as of March 28: $36.29 Billion
Number of Hedge Fund Holders: 28
Xcel Energy Inc. (NASDAQ:XEL) is an energy holding company serving over 3.5 million customers across eight US states. The company aims to be a net-zero energy provider by 2050 and has set goals to reduce carbon emissions, lower greenhouse gas emissions, and power 1.5 million electric vehicles by 2030. Xcel Energy Inc. (NASDAQ:XEL) has declined 7.99% in the past twelve months.
Xcel Energy Inc. (NASDAQ:XEL) is considered a good utility stock to buy as it offers a forward dividend yield of 3.16% with 20 consecutive years of dividend increases and a manageable payout ratio of 57.6%. In addition, XEL has been paying dividends regularly and has enough liquidity to meet its near-term obligations.
Mizuho analyst Anthony Crowdell lowered the price target on Xcel Energy Inc. (NASDAQ:XEL) to $72 from $75 but maintained a ‘Buy’ rating on the shares on March 17. Despite the decrease in target, Crowdell still sees Xcel Energy as one of the top ideas for 2023 because of its strong rate base growth and “robust” regulatory relationships.
According to Insider Monkey’s data, 28 hedge funds were long Xcel Energy Inc. (NASDAQ:XEL) at the end of Q4 2022, compared to 27 funds in the prior quarter. Echo Street Capital Management is a major shareholder of Xcel Energy. Inc. (NASDAQ:XEL), with 1.87 million shares worth $131.03 million.
Just like Exelon Corporation (NASDAQ:EXC), Duke Energy Corporation (NYSE:DUK), and American Water Works Company Inc. (NYSE:AWK), Xcel Energy Inc. (NASDAQ:XEL) is one of the best utility stocks to buy now.
Aristotle Capital Management mentioned Xcel Energy Inc. (NASDAQ:XEL) in its Q1 2022 investor letter. Here is what the fund said:
“Xcel Energy owns and operates four utilities serving 3.7 million electric customers and 2.1 million natural gas customers in eight states. Headquartered in Minneapolis, Minnesota, the firm generates $11.5 billion in annual revenue and owns infrastructure that ranges from nuclear power plants to wind farms…..(Click here to read the full text).”
15. Entergy Corporation (NYSE:ETR)
Market cap as of March 28: $22.45 Billion
Number of Hedge Fund Holders: 28
Entergy Corporation (NYSE:ETR) produces and distributes electricity in the US through its Utility and Entergy Wholesale Commodities segments. The Utility segment generates, transmits, distributes, sells electric power, and operates a natural gas distribution business. The Entergy Wholesale Commodities segment owns, operates, and decommissions nuclear power plants and sells electric power.
Entergy Corporation (NYSE:ETR) is committed to combating climate change and its impacts through strategic investments in cleaner resources. As a result, the company is taking aggressive action to achieve its goal of reducing its 2000-level emission intensity by 50%, likely before its target of 2030.
In 2022, Entergy Corporation (NYSE:ETR)’s utility business earned $1,407 million on an as-reported basis and $1,686 million on an adjusted basis, compared to 2021’s earnings of $1,490 million as-reported and $1,464 million adjusted.
Entergy Corporation (NYSE:ETR) pays a quarterly dividend of $1.07 per share, with a dividend yield of 4.27% as of March 28. The company has been paying dividends to shareholders since 1988.
Entergy Corporation (NYSE:ETR) has a ‘Moderate Buy’ rating with 6 buy, 2 hold, and 1 sell rating. Based on 9 analysts’ 12-month price targets, the average price target is $118.22, indicating a 14.01% increase from the current price of $103.69.
Insider Monkey data indicates that 28 hedge funds held interests in Entergy Corporation (NYSE:ETR) in the fourth quarter of 2022, collectively worth $430.80 million. This is down from 31 hedge funds in the preceding quarter with stakes worth $398.11 million in the company.
14. Exelon Corporation (NASDAQ:EXC)
Market cap as of March 28: $40.89 Billion
Number of Hedge Fund Holders: 31
Exelon Corporation (NASDAQ:EXC) is one of the largest utility companies in the U.S., serving more than 10 million electric and natural gas customers. The company operates through six subsidiaries: Atlantic City Electric, Baltimore Gas and Electric, Commonwealth Edison, Delmarva Power & Light, PECO Energy Company, and Potomac Electric Power Company.
Exelon Corporation (NASDAQ:EXC) aims to cut its operations emissions by 50% by 2030 and achieve net-zero operations by 2050.
Analysts’ consensus rating on Exelon Corporation (NASDAQ:EXC) stock is ‘Strong Buy,’ based on 7 Buys and 2 Hold ratings. In addition, Exelon’s 12-month average price target is $46.00, which implies a 14.31% upside potential.
At the end of Q4 2022, 31 hedge funds tracked by Insider Monkey owned stakes in Exelon Corporation (NASDAQ:EXC), down from 43 in the previous quarter. Rajiv Jain’s GQG Partners is a leading shareholder of Exelon Corporation (NASDAQ:EXC), with 33.25 million shares.
13. American Water Works Company Inc. (NYSE:AWK)
Market cap as of March 28: $27.77 Billion
Number of Hedge Fund Holders: 31
American Water Works Company Inc. (NYSE:AWK) provides water and wastewater services in 14 US states. The company’s regulated businesses division serves a diverse base of customers, including residential, commercial, industrial, and government facilities. Through 3.4 million customer connections, the division serves a population of about 14 million.
American Water Works Company Inc. (NYSE:AWK) invested $2.9 billion in regulated infrastructure upgrades and regulated acquisitions in 2022. It expects these investments to drive revenue and EPS improvements in 2023.
American Water Works Company Inc. (NYSE:AWK) stock is a good investment for dividends. It offers a forward dividend yield of 1.85% and has paid increasing annual dividends over the past 13 years. In addition, it has a manageable payout ratio of 51.03%. The company distributes dividends on a quarterly basis.
American Water Works Company Inc. (NYSE:AWK)’s 12-month average price target is $163, which implies about 15% upside potential.
There were 31 hedge funds in our database that held stakes in American Water Works Company Inc. (NYSE:AWK)’s at the end of the fourth quarter, compared to 35 funds in the third quarter. Impax Asset Management is the company’s most significant stakeholder, with 4.84 million shares worth $737.13 million.
ClearBridge Investments commented on American Water Works Company Inc. (NYSE:AWK)’s in its Q4 2022 investor letter:
“Turning to the U.S. and Canada, U.S. electric utility PG&E and U.S. water company American Water Works Company, Inc. (NYSE:AWK) also made strong contributions. AWK provides water and wastewater utility services to customers across several states within the U.S. Shares did well after AWK announced the acquisition of a municipal facility, providing additional opportunities for growth.”
12. WEC Energy Group Inc (NYSE:WEC)
Market cap as of March 28: $29.66 Billion
Number of Hedge Fund Holders: 32
WEC Energy Group Inc (NYSE:WEC) generates and distributes electricity and natural gas. It serves more than 4.6 million customers in Wisconsin, Minnesota, Illinois, and Michigan. The company’s energy network consists of 71,000 miles of electricity distribution lines and 51,400 miles of gas delivery lines.
In the shift to renewable energy, WEC Energy Group Inc (NYSE:WEC) has agreed to acquire 80% of the 250-megawatt Samson I solar project in Dallas, Texas. WEC Energy is expected to invest $250 million to acquire the stake. Samson I has a long-term power purchase agreement with telecom giant AT&T Inc. (NYSE:T).
WEC Energy Group Inc (NYSE:WEC)’s revenue rose 15.41% to $9.6 billion in 2022, lifting earnings 8.29% to $1.4 billion. EPS jumped 8.27% to $4.45. For 2023, the company anticipates EPS in the range of $4.58 – $4.62. The company generated $2.06 billion in cash flow from operations in 2022.
At the end of the fourth quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $340.31 million in WEC Energy Group Inc (NYSE:WEC), down from 34 in the preceding quarter worth $399.29 million. Greg Poole’s Echo Street Capital Management is the company’s largest shareholder, with shares worth $128.08 million.
Here is what Carillon Tower Advisers said about WEC Energy Group, Inc. (NYSE:WEC) in its Q3 2022 investor letter:
“WEC Energy Group, Inc. (NYSE:WEC), the Wisconsin electric and gas utility, fell in a weak utility group as interest rates rose and fears of bad debt expenses gathered. We view the company’s bad debt risk as relatively modest compared to the industry.”
11. Duke Energy Corporation (NYSE:DUK)
Market cap as of March 28: $73.56 Billion
Number of Hedge Fund Holders: 33
Duke Energy Corporation (NYSE:DUK) is one of America’s largest energy companies. It generates and distributes electricity and natural gas. Its electric unit serves more than 8.2 million customers in Indiana, Florida, Ohio, Kentucky, North Carolina, and South Carolina. Its natural gas unit serves 1.6 million customers in Ohio, Kentucky, Tennessee, North Carolina, and South Carolina.
Duke Energy Corporation (NYSE:DUK)’s energy comes from coal, oil, natural gas, and nuclear plants. Duke Energy aims to achieve net-zero emissions by 2050. In the meantime, it targets to cut its emissions by half by 2030. As a result, the company is investing in clean energy technologies such as advanced nuclear and hydrogen.
Moreover, Duke Energy Corporation (NYSE:DUK) is investing in wind and solar projects. On March 8, Duke Energy announced that it had begun operation of its largest solar plant. Duke Energy Sustainable Solutions is the company’s non-regulated commercial arm responsible for the solar power plant.
Duke Energy Corporation (NYSE:DUK) is one of the best utility stocks for a dividend. It offers a forward yield of 4.25% as of March 28 and has paid increasing annual dividends over the past 18 years. The company’s forward payout ratio is 67.10%.
10. American Electric Power Company Inc. (NASDAQ:AEP)
Market cap as of March 28: $45.93 Billion
Number of Hedge Fund Holders: 33
American Electric Power Company Inc. (NASDAQ:AEP) is one of the electric utility companies in the U.S. The company generates and distributes electricity to about 5.6 million customers in 11 states.
American Electric Power Company Inc. (NASDAQ:AEP) boasts about 25,000 megawatts of electricity generation capacity. The company generates electricity from diverse sources, including coal, natural gas, and nuclear plants. Moreover, the company generates electricity from renewable sources such as hydro, wind, and solar.
American Electric Power Company Inc. (NASDAQ:AEP) has the largest electricity transmission network in the U.S. at more than 40,000 miles. The company operates through 7 geographically focused divisions.
American Electric Power Company Inc. (NASDAQ:AEP) had a successful year in 2022, with revenue expanding nearly 17% and EPS increasing 7.38% to $5.09. The company anticipates 2023 operating EPS in the band of $5.19 – $5.39.
American Electric Power Company Inc. (NASDAQ:AEP) is an attractive utility stock for dividends. The company has paid increasing annual dividends over the past 13 consecutive years. It offers a forward dividend yield of 3.75% as of March 28.
9. DTE Energy Company (NYSE:DTE)
Market cap as of March 28: $22.06 Billion
Number of Hedge Fund Holders: 34
DTE Energy Company (NYSE:DTE) is a Detroit-based energy utility company. It provides electricity and natural gas, serving 3.6 million customers in Michigan. The company also has non-utility businesses responsible for industrial energy services and energy marketing and trading.
DTE Energy Company (NYSE:DTE)’s utility arm is split into two divisions: DTE Electric and DTE Gas. DTE Electric generates, transmits, and distributes electricity. DTE Gas, on the other hand, transmits and distributes natural gas to about 1.3 million customers in Michigan. With 278 gas storage wells, DTE Gas is one of the largest natural gas utilities in the U.S.
DTE Energy Company (NYSE:DTE) had a strong year in 2022, achieving operating earnings of $1.2 billion or operating EPS of $6.10, compared to $5.99 per share in 2021. The company anticipates operating EPS in the range of $6.09 – $6.40 in 2023.
DTE Energy Company (NYSE:DTE) stock is worth considering for a dividend portfolio. The company has paid increasing annual dividends for the past 13 consecutive years. It offers a forward dividend yield of 3.60% and has a manageable payout ratio of 56.86%.
There were 34 hedge funds in our database that held stakes in DTE Energy Company (NYSE:DTE)’s at the end of the fourth quarter, compared to 30 funds in Q3 2022. Ken Griffin’s Citadel Investment Group is the company’s most notable stakeholder, with 1.72 million shares worth $201.93 million.
8. NiSource Inc (NYSE:NI)
Market cap as of March 28: $11.25 Billion
Number of Hedge Fund Holders: 34
NiSource Inc (NYSE:NI) is a US energy holding company with Gas Distribution and Electric Operations segments. It serves 3.3 million customers in six states, including 2.4 million with natural gas and electricity. NiSource operates 54,800 miles of distribution pipelines and 1,000 miles of transmission pipelines.
NiSource (NYSE:NI) reported a 2022 net income of $749.0 million ($1.70 diluted EPS), up from $529.8 million ($1.27 diluted EPS) in 2021. In addition, the company reiterated its dedication to achieving a yearly non-GAAP NOEPS growth of 6-8% until 2027 and increased its 2023 guidance to a range of $1.54-$1.60 for non-GAAP NOEPS.
NiSource (NYSE: NI) has paid quarterly dividends since 1973 and declared a dividend of $0.25 per share on March 14, consistent with past payments. As of March 28, 2023, NiSource’s relative dividend yield was 3.7%, higher than the industry median of 3.6%.
34 hedge funds reported bullish bets on NiSource Inc (NYSE:NI) in Q4 2022, with aggregate holdings worth $1.01 billion. In contrast, 32 hedge funds were bullish on the stock a quarter ago. Zimmer Partners is a leading shareholder of NiSource Inc (NYSE:NI), with 4.74 million shares worth $130 million.
7. FirstEnergy Corp. (NYSE:FE)
Market cap as of March 28: $22.35 Billion
Number of Hedge Fund Holders: 36
FirstEnergy Corp. (NYSE:FE) generates, transmits, and distributes electricity through its subsidiaries in the US, operating coal-fired, nuclear, hydroelectric, wind, and solar power generating facilities. It runs 24,080 circuit miles of transmission lines and 274,518 miles of overhead pole line and underground conduit, serving around 6 million customers across several states, including Ohio, Pennsylvania, and New York.
Mizuho analyst Anthony Crowdell lowered his price target on FirstEnergy Corp. (NYSE:FE) to $42 from $43 and retained a ‘Neutral’ rating on the shares on February 6. This came after the company announced the sale of an incremental 30% stake in FE Transmission to Brookfield for $3.5 billion.
At the end of Q4 2022, 36 hedge funds in the Insider Monkey database reported owning interests in FirstEnergy Corp. (NYSE:FE), down from 41 in the preceding quarter. The total value of these stakes is roughly $1.49 billion. Among these hedge funds, First Pacific Advisors LLC was the company’s leading stakeholder in Q4.
6. NRG Energy Inc. (NYSE:NRG)
Market cap as of March 23: $7.57 Billion
Number of Hedge Fund Holders: 39
NRG Energy Inc. (NYSE:NRG) is a US-based integrated power company with more than 23,000 megawatts of power generation capacity and over 3.7 million customers. They operate in three segments: Texas, East, and West.
NRG Energy Inc. (NYSE:NRG) is committed to reducing their carbon emissions by 50% by 2025 and achieving net-zero emissions by 2050. Julien Dumoulin-Smith, an analyst at BofA, raised the rating on NRG Energy Inc. (NYSE:NRG) from ‘Neutral’ to ‘Buy’ on March 20, with a revised price target of $36, up from $35.
NRG Energy Inc. (NYSE:NRG) is a top dividend payer with a reliable 4.6% yield, outperforming its sector peers and the S&P 500. Its dividend payout has increased three times since 2018, making it highly reliable. NRG’s stock has risen 1.03% year-to-date as of March 28, thanks to strong earnings and sales growth.
Hedge fund sentiment for NRG Energy Inc. (NYSE:NRG) picked up strongly in Q4 2022. A total of 39 hedge funds tracked by Insider Monkey reported owning stakes in NRG Energy Inc. (NYSE:NRG) as of the end of the period, compared to 27 funds that had stakes in NiSource Inc. (NYSE:NI) at the conclusion of the third quarter of 2022. Pzena Investment Management is the most significant shareholder of the company.
Along with Exelon Corporation (NASDAQ:EXC), Duke Energy Corporation (NYSE:DUK), and American Water Works Company Inc. (NYSE:AWK), NRG Energy Inc. (NYSE:NRG) is one of the best utility stocks to buy now.
Legacy Ridge Capital commented on NRG Energy, Inc. (NYSE:NRG) in its Q4 2022 investor letter:
“NRG Energy, Inc. (NYSE:NRG) was covered in the 2019 letter with VST. We sold the shares as COVID induced volatility presented better risk/reward opportunities, but never subsequently repurchased shares—as we did with VST. Not only do we think VST is a better value, but the management team at NRG appears to have gone astray. Despite coming to his position during an activist campaign by Elliott Management in 2017, when the prior empire-building CEO was shown the door, the replacement CEO has seemingly embarked on the same failed strategy. In early December they announced the purchase of Vivint Smart Home, a smart home platform company, for $2.8 billion. The transaction diversifies NRG’s business, increases leverage, dramatically reduces intermediate-term shareholder capital returns, and most importantly, is the opposite of what management told us they were going to do when they assumed the role in 2017. The stock fell 15% on the day of the announcement and is down another 5% since then, and now 10% lower than when we first wrote about it. We like the generation business at NRG and the valuation is almost back to interesting, but we’d probably have to see turnover in the C-suite and a refreshed corporate strategy to reignite our enthusiasm.”
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Disclosure: None. 16 Best Utility Stocks To Buy Now is originally published on Insider Monkey.
