Top Utilities Stocks

DTE, NEE, and OGE are leading their peers in combined earnings and revenue growth

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Top utility stocks this month include DTE Energy Co., NextEra Energy Inc., and OGE Energy Corp., which are leading their peers in combined earnings and revenue growth even amid a global economic slowdown. Utilities stocks as a group, represented by the Utilities Select Sector SPDR ETF (XLU), rose 3% over the past 12 months while the Russell 1000 index fell 13%.

Utilities are often seen as a safe investment during recessions or periods of weak economic growth because demand for electricity, gas, and water services remains steady.

Below, we look at the top utilities stocks for best value, fastest growth, and most momentum. All data are as of Jan. 19.

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) 31.03 7.1 4.0
UGI Corp. (UGI) 38.90 8.2 7.8
Brookfield Renewable Corp. (BEPC) 31.04 5.3 7.9

Source: YCharts

  • NRG Energy Inc.: NRG is an integrated power company that generates electricity and provides energy and natural gas to residential, commercial, and industrial customers throughout the U.S. and Canada. On Dec. 6, NRG said it will acquire for $2.8 billion Vivint Smart Home Inc., which has nearly two million customers and sells technology, products, and services to create smart homes. The all-cash transaction is expected to close in the first quarter of 2023.
  • UGI Corp.: UGI, through its subsidiaries, distributes and markets energy products and services worldwide. It operates natural gas and electric utilities, distributes energy, and manages midstream energy assets. UGI recently announced that Robert F. Beard was appointed COO effective Dec. 1. Beard previously held executive-level positions at the company and its subsidiaries, including CEO of UGI Utilities Inc. and CEO of Mountaineer Gas Co.
  • Brookfield Renewable Corp.: Brookfield owns and operates pure-play renewable energy facilities that focus on wind, solar, and hydroelectric power.

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 year-over-year (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 (%)
DTE Energy Co. (DTE) 112.56 21.8 1,430 41.4
NextEra Energy Inc. (NEE) 82.59 164.1 273.9 53.8
OGE Energy Corp. (OGE) 37.98 7.6 4.0 47.0

Source: YCharts

  • DTE Energy Co.: DTE produces, distributes, and sells gas and electricity in Michigan. In December, DTE partnered with Stellantis to expand DTE's MIGreenPower program by adding 400 megawatts of new solar projects. In addition, Stellantis plans to manufacture all cars in Michigan with the equivalent of 100% carbon-free electricity by 2026.
  • NextEra Energy Inc.: NextEra is an electric energy company that owns Florida Power & Light, the largest utility in Florida. NextEra also generates and distributes electricity through renewable energy with wind, solar, and other sources.
  • OGE Energy Corp: OGE is a holding company with investments in energy and energy service providers that deliver electricity in Oklahoma and western Arkansas. It is the parent company of Oklahoma Gas & Electric Co. Net income increased by 4% as operating revenues climbed by almost half for the latest quarter, aided by warmer weather.

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 (%)
Constellation Energy Corp. (CEG) 80.84 26.4 94.2
New Fortress Energy Inc. (NFE) 33.67 7.0 61.0
PG&E Corp. (PCG) 15.44 32.8 22.2
Russell 1000 N/A N/A -13.0
Utilities Select Sector SPDR ETF (XLU) N/A N/A 2.9

Source: YCharts

  • Constellation Energy Corp.: Constellation is a clean energy company that produces energy-related products through nuclear, wind, and natural gas assets. 
  • New Fortress Energy Inc.: New Fortress finances, develops, and runs natural gas facilities, power plants, and other operations. New Fortress announced on Dec. 12 that it will pay a dividend of $3.00 per share to shareholders on Jan. 13, 2023.
  • PG&E Corp.: PG&E is the parent company of electricity and natural gas utility Pacific Gas and Electric Co.

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 the utilities stocks offer more lucrative returns while typically displaying lower volatility than stocks in other sectors.

Cost of Servicing Debt: Utilities companies carry high debt levels to build, maintain, and upgrade essential infrastructure, 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. In addition, 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.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses in our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  1. YCharts. "Financial Data."

  2. YCharts. "Financial Data."

  3. NRG Energy Inc. "NRG Energy, Inc. to Acquire Vivint Smart Home, Inc."

  4. UGI Corp. "UGI Appoints Robert F. Beard as Chief Operations Officer."

  5. DTE Energy Co. "DTE Energy Co. Partners With Stellantis to Add 400 Megawatts of New Solar Projects."

  6. OGE Energy Corp. "OGE Energy Corp. Reports Third Quarter 2022 Results."

  7. New Fortress Energy Inc. "NFE Announces Update to Dividend Policy, Plan to Return Significant Capital to Shareholders."

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

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

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