NRG Energy (NYSE:NRG)
NRG Energy Inc. makes the power market smarter, more sustainable and more reliable for businesses and individuals. The integrated power company has generated more than 23,000 megawatts and serves over 3.7 million customers in the U.S. NRG Energy is committed to a 50% reduction in carbon emissions by 2025 and net-zero emissions by 2050.
The power stock has a market cap of $8 billion and an EPS of $16.08. It has an annual dividend yield of $1.20 per share, high liquidity and trades over 190,000 shares per day. It generated revenue of $9.2 billion in 2019.
UGI Corp is an American holding company that, through its subsidiaries, is involved in the transport and marketing of energy and related services. Its segments include AmeriGas Propane, UGI International, Midstream & Marketing and UGI Utilities. The AmeriGas Propane segment consists of the propane distribution business. The UGI International segment consists of LPG distribution businesses. The Midstream & Marketing segment consists of energy-related businesses. The UGI Utilities segment consists of the regulated natural gas and electric distribution.
Dominion Energy (NYSE:D)
Based in Richmond, Virginia, Dominion Energy is an integrated energy company with approximately 30 gigawatts of electric generation capacity and more than 90,000 miles of electric transmission and distribution lines. Dominion owns a liquefied natural gas export facility in Maryland and is now beginning a 5.2 GW wind farm 27 miles off the Virginia Beach coast.
NextEra Energy (NYSE:NEE)
NextEra Energy’s regulated utility, Florida Power & Light, distributes power to more than 5 million customers in Florida. FP&L contributes more than 60% of the group’s operating earnings. The renewable energy segment generates and sells power throughout the United States and Canada. Consolidated generation capacity totals more than 50 gigawatts and includes natural gas, nuclear, wind, and solar assets.
PG&E is a holding company whose main subsidiary is Pacific Gas and Electric, a regulated utility operating in Central and Northern California that serves 5.3 million electricity customers and 4.6 million gas customers in 47 of the state’s 58 counties. PG&E operated under bankruptcy court supervision between January 2019 and June 2020. In 2004, PG&E sold its unregulated assets as part of an earlier postbankruptcy reorganization.
The stock market often has its ups and downs but there are ways to mitigate risk. When the market gets rocky, many investors turn to utility stocks to hedge their riskier investments. These stocks have historically performed well and maintained value during particularly volatile periods — and many of these stocks also pay attractive dividends.
Today, we’ll take a look at these stocks that investors are keeping their eyes on. We’ll also introduce you to a few brokers you can use to begin purchasing them, index funds and more stocks under $5 worth exploring.
Quick Look at the Best Utility Stocks:
Utility stocks are stocks that represent companies providing utility services to residential and commercial properties. Some services in the utility sector include:
- Water and sewage services
- Trash and waste removal
Many dividends are practical monopolies in their area. The sheer initial cost to create a utility system is so high that, in many areas, there is only one company providing each individual service. This means that utilities typically show less volatility — but also less growth than other sectors.
In many cases, utilities also pay investors higher dividends than competing sectors. A dividend is a portion of a company’s profits that a corporation pays out to shareholders on a quarterly, monthly or annual basis. Though very few companies are required to pay dividends, utilities tend to attract dividend investors who are looking to create passive income streams thanks to their higher payouts.
Best Online Brokers for Utility Stocks
Before you can start purchasing utility stocks, you’ll need to open an account with a broker. A broker is a company or entity authorized to purchase stocks on your behalf, sometimes in exchange for a commission or fee. No matter if you’re shopping for high-value utility stocks or stocks under $10, the right broker can make investing simpler.
Most brokerage firms now allow you to open an account online and place your trades through a desktop platform. Don’t have a brokerage account? Consider a few of our favorites below.
Features to Look for in Utility Stock
There are dozens of utility stocks to invest in — but not every utility stock is equally as valuable. Here are some key characteristics to look for when you begin comparing utility stocks.
- A reasonable dividend yield: Many utility investors are interested in creating a passive stream of income by collecting dividends from their investments. While it can be tempting to compare stocks based on dividend dollar amount, you should instead look at the stock’s dividend yield. The dividend yield is a ratio that compares the current price of a stock with its annual dividend payout.
Be wary of any stock that has a very high yield — as a general rule, a yield above 10 typically means that a dividend cut is coming in the near future.
- Higher earnings per share: A stock’s earnings per share (EPS) divides the total net profit of a corporation by the total number of outstanding shares of stock. Search for companies with a positive EPS — this indicates that the company is profitable and unlikely to go bankrupt in the near future.
- A lower P/E ratio: A price-earnings ratio (P/E ratio) is equal to the company’s current stock price divided by its EPS. When you shop for utility stocks, look for ones with a lower P/E ratio — this may indicate that the stock is undervalued and likely to rise in price soon.
Powering Your Portfolio With Utilities
With higher-than-average dividends and plenty of select stocks under $20 worth investing in, utility stocks can be a valuable addition to any portfolio. Like any other type of investment, you should never rely on utility stocks to make up the bulk of your portfolio. Though utilities are exceptionally stable, use them to supplement a portfolio with large-cap funds, mutual funds and total market index funds to protect your investments.
Frequently Asked Questions
Why do people like utility stocks?
Many people find utility stocks attractive from their highly reliable business and stable revenue in comparison to the rest of the market.
Are utilities a good investment?
Utilities are a great stock investment because even when times get tough, people still need to use them.
Do utility stocks do well in inflation?
Yes, utility stocks tend to do well during inflationary times.