The utilities sector is a large industry broken down into subcategories. Companies involved in this area range from electric to gas, multi-utilities, and independent power and renewable electricity producers. The sector's market capitalization as a whole is $1.12 trillion.
The utilities sector is also a popular place for investors who favor long positions and relative stability. It is favorable because of a lower beta compared to the overall market. Governments provide the regulatory framework and proper infrastructure for utilities companies to function at optimal levels. Utilities essentially run the base of civilization, and society needs this basic need to function on more than just a financial level, making it a safe bet for volatile times in the market.
Many companies in the utilities sector are established and pay out regular dividends, and it is not difficult to find quarterly dividends at rates far outpacing any other area in the market. The industries listed below illustrate the variety of individual sectors and how they contribute to the overall sector.
The electric utilities industry includes areas that create or distribute electricity, including nuclear factories. The sector has a market capitalization of approximately $539.28 billion. One notable company in this subcategory is NextEra Energy Inc. (NYSE: NEE), which has multiple subsidiaries that distribute electric energy in both the United States and Canada. The company generates its energy from traditional fossil fuels, as well as nuclear and renewable energy sources, and also leases out fiber optic cables. It serves approximately 9 million people throughout the United States. As of Feb. 23, 2016, its stock is trading at $115.38 per share.
The gas utilities industry constitutes any company that distributes or funnels gas to consumers, though it does not include the commodities companies that excavate the gas or refine it. The sector's market capitalization is around $63.21 billion.
A notable company in this subcategory is AGL Resources Inc. (NYSE: GAS). This is another company in the utilities sector that has been on an uptrend, regardless of the current market volatility, trading at $64.63 per share as of Feb. 23, 2016. AGL has been in business for over 150 years and is still building itself and progressing in the natural gas industry. Its reaches over 4.5 million customers, creating and managing intrastate natural gas pipelines and storage facilities.
Multi-utilities is an industry that does not focus on one avenue of the utilities sector specifically. It includes companies that are diversified in electric, gas and water utilities. The sector's market cap is $382.22 billion. It is a choice investment because it is not only diversified, but part of the stable utilities market.
London-based National Grid plc (NYSE: NGG) provides electricity and gas for two different nations: the United States, with a focus on the Northeastern part of the country, and the United Kingdom. The company's primary listing is on the London Stock Exchange, though it has a secondary listing on the New York Stock Exchange (NYSE). Its stock is trading at $68.74 per share on the NYSE, as of Feb. 23, 2016. The company provides electricity transmission networks in Great Britain, and the U.S. section provides both gas and electricity. It has been in a steady uptrend for the past few months.
Independent Power and Renewable Electricity Producers
Independent power and renewable electricity producers provide utilities companies with marketing and trading specialists. The companies in this area help with the distribution of electricity and other forms of energy to consumers. The sector does not include companies that manufacture the tools to generate electricity. It has a market capitalization of $107.76 billion.
AES Corp. (NYSE: AES) does not tout the highest numbers in the utilities industry, but it is nonetheless stable. It is diversified and owns and operates different power plants, and also sells to regular customers and businesses. The company operates in the United States, Europe, Asia and parts of South America. Its stock is trading at $9.65 per share, as of Feb. 23, 2016.