Top Utilities Stocks for September 2022

NRG is top for value, NEE is top for growth, and NFE is top for momentum

The utilities sector is made up of companies that provide electricity, natural gas, water, sewage, and other services to homes and businesses. Many of these companies are heavily regulated. They include major utilities companies such as Dominion Energy Inc. (D), Duke Energy Corp. (DUK), and Xcel Energy Inc. (XEL).

Utilities stocks, as represented by the Utilities Select Sector SPDR ETF (XLU), an exchange-traded fund (ETF), have significantly outpaced the broader U.S. stock market over the past year. XLU has provided a total return of 14.2% over the past 12 months, compared with the Russell 1000 Index's total return of -11.1%. These market performance numbers and statistics in the tables below are as of Aug. 29, 2022.

Here are the top three utilities stocks with the best value, fastest growth, and most momentum.

Best Value Utilities Stocks

These are the utilities stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated.

Best Value Utilities Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
NRG Energy Inc. (NRG) 41.49 9.8 2.9
UGI Corp. (UGI) 39.93 8.4 6.4
OGE Energy Corp. (OGE) 41.57 8.3 9.0

Source: YCharts

  • NRG Energy Inc.: NRG Energy is an integrated power company that generates electricity and provides energy solutions and natural gas to residential, commercial, and industrial customers throughout the United States and Canada.
  • UGI Corp.: UGI, through its subsidiaries, distributes and markets energy products and services worldwide. The company operates natural gas and electric utilities, distributes energy, manages midstream energy assets, and more. On Aug. 3, UGI announced a quarterly dividend of $0.36 per common share. The dividend is payable Oct. 1 to shareholders of record as of Sept. 15, 2022.
  • OGE Energy Corp: OGE Energy is a holding company with investments in energy and energy service providers offering physical delivery for electricity in Oklahoma and western Arkansas. It is the parent company of Oklahoma Gas and Electric Co. The company reported earnings for Q2 2022 on Aug. 4. Net income fell sharply year over year (YOY) as operating revenues climbed moderately. Net income was negatively affected by the partial reversal of a Q1 2022 tax benefit tied to mark-to-market activity and the sale of Energy Transfer limited partner units.

Fastest Growing Utilities Stocks

These are the top utilities stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest Growing Utilities Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
NextEra Energy Inc. (NEE) 87.02 171.0 438.5 32.0
PPL Corp. (PPL) 29.88 22.0 433.3 31.7
Southern Co. (SO) 78.68 83.6 194.3 38.6

Source: YCharts

  • NextEra Energy Inc.: NextEra Energy is one of the world's largest utility companies with subsidiaries including Florida Power & Light Company. NextEra Energy generates and distributes energy to wholesale and retail consumers in North America and is a major producer of energy from renewable energy like solar, wind, and nuclear power.
  • PPL Corp.: PPL is the parent company of four utilities. It provides natural gas and electricity to 3.5 million customers the northeastern U.S., and it is focusing on added energy sources such as hydrogen and various biofuels. PPL announced on Aug. 26 a quarterly common stock dividend of $0.225 per share, payable Oct. 3 to shareholders as of Sept. 9, 2022.
  • Southern Co.: Southern is involved in providing energy and telecommunication services among its subsidiaries across the U.S. On July 28, Southern reported Q2 2022 earnings results. Net income nearly tripled YOY as revenue rose. Southern's results were driven by higher fuel costs and as consumers used more energy during warmer weather in the second quarter, which included the second-hottest June in 50 years.

Utilities Stocks With the Most Momentum

These are the utilities stocks that had the highest total return over the past 12 months.

Utilities Stocks With the Most Momentum
Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
New Fortress Energy Inc. (NFE) 59.75 12.4 95.4
PG&E Corp. (PCG) 12.52 30.9 37.3
Vistra Corp. (VST) 24.74 10.3 36.6
Russell 1000 N/A N/A -11.1
Utilities Select Sector SPDR ETF (XLU) N/A N/A 14.2

Source: YCharts

  • New Fortress Energy Inc.: New Fortress Energy is an infrastructure company that finances, develops, and runs natural gas facilities, power plants, and other operations.
  • PG&E Corp.: PG&E Corp. is a holding company which is the parent of Pacific Gas and Electric Co. It serves customers across northern and central California. The company reported Q2 2022 earnings on July 28. Net income and total operating revenues both fell YOY. Natural gas revenues increased over the period as electricity revenues declined.
  • Vistra Corp.: Vistra is a holding company that, through subsidiaries, is involved in electricity generation, wholesale purchases and sales of energy, commodity risk management, and retail sales of electricity and natural gas.

The Impact of Interest Rates on Utilities Stocks

Those who invest in utilities stocks should understand how fluctuations in interest rates can influence their performance. Typically, changing interest rates affect this sector in two ways: competition with fixed-interest securities and the cost of servicing debt.

Competition With Fixed Interest Securities: Generally, those who invest in this group prefer yield over growth. Therefore, when interest rates are high, these investors favor fixed-interest securities over utilities stocks as they provide attractive risk-free returns.

For example, if the U.S. 10-year Treasury Note and a utilities stock both yield 3%, risk-averse investors would invest in the Treasury note because it offers the same yield but isn't affected by company or market risk. However, these investors would favor utilities stocks over fixed-interest securities when interest rates are low or falling because they offer more lucrative returns while typically displaying lower volatility than stocks in other sectors.

Cost of Serving Debt: Utilities companies carry high debt levels to build, maintain, and upgrade essential infrastructures, such as electricity grids, gas pipelines, water systems, and renewable energy sources. Therefore, servicing that debt becomes more difficult when interest rates rise. If utilities companies are unable to pass extra financing costs on to customers, they may be partially borne by investors.

Advantages of Utilities Stocks

Most utilities companies pay investors steady dividends as they form part of a regulated industry with highly predictable cash flows. Moreover, ongoing demand for their services, irrespective of the economy's health, makes them an attractive safe-haven investment during periods of economic uncertainty, such as during a recession or downturn.

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  1. YCharts. "Financial Data."

  2. UGI Corp. "UGI Declares Common Dividend."

  3. OGE Energy Corp. "OGE Energy Corp. reports second quarter 2022 results."

  4. PPL Corp. "PPL to Pay Quarterly Stock Dividend Oct. 3, 2022."

  5. Southern Co. "Southern Company Reports Second-Quarter 2022 Earnings."

  6. PG&E Corp. "PG&E Corporation Reports Second-Quarter 2022 Financial Results, on Track for Adjusted GAAP Earnings Guidance of $0.74 to $1.02 per Diluted Share and Reaffirmed Non-GAAP Core Earnings Guidance of $1.07 to $1.13 per Diluted Share."

  7. J.P. Morgan. "What to Consider When Investing in Utilities."

  8. The Wall Street Journal. "How Utility Stocks Have Kept Their Spark."

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