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Utilities companies are essential service providers, offering electricity, natural gas, and water to homes and businesses in the U.S. As heavily regulated entities, they are stable investments with slow but steady growth and reliable dividends. Here are three attractive utilities stocks to consider for your portfolio, categorized by market capitalization.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) remains a standout in the renewable energy sector with robust performance. As a global leader in wind and solar energy, its clean energy investments drive consistent growth, while its regulated utility business ensures steady earnings and cash flow. The company’s strong presence in key markets, like Florida, where data center demand and climate-related heat are rising, contributes to its appeal among renewable energy companies.
The company plans to double its capacity by 2026 by shifting to cleaner energy sources, supporting dividend increases. The company saw significant revenue and net income growth in Q1, driven by its expanding clean energy business. Though not cheap, it’s a high-return energy stock suitable for long-term investors, with renewables commitment promising rewarding results.
NEE is a strong and stable stock to consider for investment. Its utilities in Florida, along with solar and wind energy production, make it resilient during recessions. Additionally, the U.S. government’s significant investments in electrification and the rising demand from data centers contribute to NEE’s positive outlook. The company is expected to benefit from increased investments in the U.S. power grid, further bolstering its long-term prospects.
Southern Co. (SO)
Southern Co. (NYSE:SO) is a gas and electric utility holding company based in Atlanta, Georgia. It serves nine million customers across six states, making it the second-largest utility in terms of customer base. Despite a slight dip in its stock in the past year, it offers a strong forward yield of 4.29%, higher than the utility sector’s average. With 21 consecutive years of dividend increases, Southern Co. is committed to maintaining its status as a reliable dividend stock.
Southern Company offers a dividend yield of 4%, twice the market average. Its dividend payout ratio of 75% is reasonable for a company with steady profits. While future EPS growth might be moderate, a 4%-5% annual growth rate seems feasible based on past performance. Overall, Southern Company appears attractive with its safe dividend yield.
Moreover, SO is a significant gas and electric utility holding company with a wide customer base in the U.S., especially in Georgia, where millennials are increasingly relocating. Despite recent underperformance, its strategic positioning and customer reach present a potential growth opportunity.
Duke Energy (DUK)
Duke Energy (NYSE:DUK) is a strong long-term stock choice with the benefit of a natural monopoly as a public utility. Its strategic location in the Carolinas with lower living costs adds to its appeal for investors.
Devon Energy delivered robust Q1 earnings, achieving a record-high oil production of 320,000 barrels per day. The company foresees better margins and profitability with expected oil price increases. Aggressive share buybacks and increased dividends reflect management’s confidence in the stock’s undervaluation. Analysts share a bullish outlook, projecting a potential 45% gain with a consensus price target of $63.96.
Despite having room for financial improvement, Duke remains consistently profitable. Analysts hold a moderate buy consensus on DUK, projecting a 22% upside potential. Duke Energy, with a market cap of around $71 billion, enjoys a natural monopoly in the utility sector, discouraging competition. It offers a forward yield of 4.39% and has raised dividends for 18 consecutive years, making it an attractive option for patient investors seeking high-yield stocks.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.