In this article, we discuss the 10 best electric utility stocks to invest in.
Tight supply in the energy markets and the subsequent rise in inflation has put US consumers in a tight spot. A recent report by LendingClub and PYMNTS.com has revealed that 61% of US consumers lived paycheck-to-paycheck in April, in comparison to 52% in April last year. A worrying 36% of those receiving $250,000 or more in annual income were also living paycheck-to-paycheck. This comes as inflation saw a yearly increase of 8.6% in May, a sky-high figure not seen since December 1981. Average gasoline prices in the United States exceeded the $5 per gallon mark for the first time in history on June 11, which was in comparison to an average price of $3.07 per gallon a year ago. Chief economist at Moody’s Analytics Mark Zandi noted that the typical household is having to spend around $160 more on gasoline every month in comparison to last year.
President Joe Biden in early June signed a 24-month waiver on tariffs for imports of solar panels from Thailand, Malaysia, Cambodia and Vietnam. This measure was taken in a bid to reduce inflationary pressures on the US market, and the White House is also considering invoking the Defense Production Act in order to boost US production of solar panels and other green energy technologies. A group of renewable energy companies last week pledged to buy $6 billion worth of US-made solar panels over the next four years if local manufacturing takes off. These companies which include The AES Corporation (NYSE:AES) and Clearway Energy, Inc. (NYSE:CWEN) offered to buy 7 GW worth of solar panels per annum, which is more than a quarter of the capacity installed by the United States in 2021. This proposal is meant to attract manufacturers towards the solar panel industry and help reduce the country’s dependence on foreign imports of the crucial green energy technology.
The rising prices in the energy sector are seeing investors turn their attention towards utility stocks. Because consumers need electricity, gas, and water no matter what their affordability, utilities tend to outperform during times of larger market volatility. These firms can also pass on the rise in cost to their consumers, if permitted by regulators, and offer dividend payments which makes holding these stocks even more attractive during an economic downturn.
If you wish to take advantage of the rally in energy prices and defensively position your portfolio in the current times, electric utility stocks present a good investment opportunity. The ongoing market volatility has many investors putting their money into defensive plays such as Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM) and The Procter & Gamble Company (NYSE:PG), but in this article we’ll talk about the best electric utility stocks to buy now.
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Best Electric Utility Stocks To Invest In
10. Alliant Energy Corporation (NASDAQ:LNT)
Number of Hedge Fund Holders: 17
First up is Alliant Energy Corporation (NASDAQ:LNT), a Wisconsin-based company which provides electricity and natural gas to millions of retail, wholesale and industrial customers across the states of Minnesota, Iowa, and Wisconsin. It deals in the production and distribution of electricity through its subsidiary Wisconsin Power and Light Company, and also owns interests in a natural gas-fueled 347 MW power plant in Wisconsin, as well as a 225 MW wind farm in Oklahoma. Alliant Energy Corporation (NASDAQ:LNT) has grown its dividend for 18 years in a row, and offers a healthy 2.95% yield as of June 27.
On May 31, Argus analyst David Coleman reiterated a ‘Buy’ rating on Alliant Energy Corporation (NASDAQ:LNT) shares and bumped the price target to $70 from $68. The analyst views LNT as a core holding in a diversified portfolio, given that it provides a steady and secure stream of income in the current macro setup. He notes that the company’s “solid base of regulated utility assets” in the Midwest are expected to drive long-term earnings growth, and that growing industrial and commercial demand should complement strong residential demand for the firm.
For the quarter ending March, Alliant Energy Corporation (NASDAQ:LNT) disclosed an EPS of $0.77, exceeding analysts’ predictions by $0.05. The company pulled in a revenue of $1.07 billion, beating Street estimates by $94.9 million and showing year-on-year growth of 18.53%.
Out of all the hedge funds tracked by Insider Monkey, 17 reported bullish bets on Alliant Energy Corporation (NASDAQ:LNT) with a combined value of $97.8 million. With a position worth more than $31 million, ExodusPoint Capital was the biggest shareholder of the electric utility company in the first quarter of 2022.
In addition to Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM) and The Procter & Gamble Company (NYSE:PG), Alliant Energy Corporation (NASDAQ:LNT) is a good investment option in the current economic climate.
9. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 23
Then there’s Sempra (NYSE:SRE), an electric utility company based in California, which provides gas and electricity in California through its subsidiaries San Diego Gas & Electric Company, and Southern California Gas Company. It also deals in the provision of electricity in Texas through its subsidiary Sempra Texas Utilities. Sempra (NYSE:SRE) also has interests in the crucial LNG market in the United States. With a 3.04% yield as of June 27 and 18 years of dividend increases under its belt, as well as a 14.15% share price rally in the year to date, Sempra (NYSE:SRE) is one of the best electric utility stocks to buy now.
Sempra (NYSE:SRE) announced its Q1 earnings on May 5, and reported EPS of $2.91, beating Street estimates by $0.11. The company raked in $3.82 billion in revenue for the quarter, also beating analysts’ expectations by $408.3 million and growing 17.2% in comparison to the same period over last year.
In late April, Credit Suisse analyst Nicholas Campanella initiated coverage of Sempra (NYSE:SRE) with an ‘Outperform’ rating and a $180 price target. The analyst noted that utility firms which can best manage inflationary impacts will outperform peers in the current macro environment, and Sempra is well-positioned given its 70% interest in SIP (Sempra Infrastructure Partners), which potentially offers upside from LNG (liquified natural gas) contracting.
A detailed study of the 912 hedge funds tracked by Insider Monkey at the end of the first quarter showed that 23 hedge funds were bullish on Sempra (NYSE:SRE) shares, with aggregate positions worth roughly $209 million. The firm’s largest shareholder was Millennium Management, with a position consisting of nearly 365,000 shares worth $61.4 million, up 24% from the previous quarter.
ClearBridge Investments talked about the future prospects and market position of Sempra (NYSE:SRE) in its Q1 2022 investor letter. Here’s what the fund said:
“Energy shortages in Europe were only intensified by the invasion. The conflict and economic sanctions against Russia have brought to the forefront EU dependence on Russian oil and natural gas. As Germany and its EU neighbors look to diversify their natural gas suppliers, some U.S. companies stand to benefit. Within the portfolio, Sempra Energy (NYSE:SRE) is well-positioned. Sempra’s previously underappreciated portfolio of infrastructure assets, with existing as well as prospective liquified natural gas (LNG) facilities, should benefit from renewed interest in U.S.-sourced LNG. The U.S. commitment to increase LNG exports to Europe over the coming years should create a favorable long-term demand environment and hopefully regulatory framework benefiting Sempra along with other natural gas and LNG suppliers. Sempra’s core utilities operations in California and Texas continue to generate solid mid- to high-single-digit earnings growth, and it enjoys additional growth opportunities from renewable natural gas (RNG), hydrogen and other renewable sources of energy.”
8. CenterPoint Energy, Inc. (NYSE:CNP)
Number of Hedge Fund Holders: 23
CenterPoint Energy, Inc. (NYSE:CNP) is one of the largest utility companies in the United States with a $18.3 billion market cap. It is based in Houston, Texas, and was founded in 1866. The company deals in the provision of electricity and natural gas to more than 7 million metered customers in the states of Indiana, Louisiana, Arkansas, Texas, Minnesota, Mississippi and Ohio. CenterPoint Energy, Inc. (NYSE:CNP) is also a safe dividend stock, having paid dividends to shareholders since 1999. As of June 27, its yield stands at 2.35%.
In the first quarter, CenterPoint Energy, Inc.’s (NYSE:CNP) revenue showed year-on-year growth of 8.5% to come in at $2.76 billion, above estimates by $209.5 million. The company shares have soared 17.7% in the last 12 months, and 4.1% in the last 6 months as of June 27.
In April, Mizuho analyst Anthony Crowdell gave CenterPoint Energy, Inc. (NYSE:CNP) an unchanged ‘Buy’ rating and raised the price target to $34 from $31. The analyst sees CNP as a top idea, noting that its 8% annual earnings growth is among the highest in the industry. Credit Suisse analyst Nicholas Campanella initiated coverage of CenterPoint Energy, Inc. (NYSE:CNP) with an ‘Outperform’ rating and a $34 price target. He noted that the company is benefitting from a wider restructuring and still has room to gain from multiple expansion.
As of the end of the first quarter of 2022, 23 hedge funds were bullish on CenterPoint Energy, Inc. (NYSE:CNP) shares, with aggregate positions worth $234.9 million. With a $66.5 million stake consisting of 2.17 million shares, Millennium Management was the leading shareholder of CenterPoint Energy, Inc. (NYSE:CNP) in the first quarter.
Asset management firm Miller Howard Investments talked about CenterPoint Energy, Inc. (NYSE:CNP) in its Q3 2021 investor letter. Here’s what it said:
“In late August, we increased the portfolio’s cyclical exposure by trimming utilities after a period of relative outperformance and reallocating the capital to midstream energy, which had pulled back over the summer. Additionally, we trimmed CenterPoint Energy (CNP) after periods of relative strength. We had previously increased our positions in late 2020 and February 2021, respectively, after periods of relative weakness.”
7. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 26
Consolidated Edison, Inc. (NYSE:ED) is up next on our list of the best electric utility stocks to buy. It is based in New York, and deals in the provision of electricity, natural gas and steam to residential, commercial, industrial, and government customers across New York City and the Westchester Country area. It also deals in the development, operation and ownership of renewable energy and energy infrastructure projects.
Mizuho analyst Anthony Crowdell on June 27 kept a ‘Buy’ rating on Consolidated Edison, Inc. (NYSE:ED) shares and lowered the price target to $99 from $100. He believes the firm should be able to divest the non-regulated assets of its clean energy business at a 13-14 times enterprise value to EBITDA multiple. He remains bullish on the company shares, and slightly reduced the price target to reflect current market multiples. Consolidated Edison, Inc. (NYSE:ED) recently reported that it had hired banking giant Barclays plc (NYSE:BCS) to initiate a sale process for its renewable energy portfolio, which could be potentially valued at around $4 billion. The company’s renewable energy unit operates solar and wind farms across the United States, and has a production capacity of around 3 GW.
For Q1 2022, Consolidated Edison, Inc. (NYSE:ED) posted earnings per share which fell below estimates by $0.01. However, revenue of $4.06 billion for the quarter beat consensus estimates by $354.6 million, representing an increase of 10.42% from the year-ago quarter. The company is also a steady dividend payer, boasting 47 consecutive years of payout increases. As of June 27, Consolidated Edison, Inc. (NYSE:ED) doles out an impressive 3.38% yield to shareholders, and has gained 26.74% in the last 12 months, and 9.90% in the year so far.
Hedge funds were seen snapping up on Consolidated Edison, Inc. (NYSE:ED) shares. At the end of March, 26 hedge funds reported ownership of stakes in the electric utility company, in comparison to 22 hedge funds a quarter earlier. With 1.34 million shares priced at $127 million, AQR Capital Management was the top Q1 shareholder of Consolidated Edison, Inc. (NYSE:ED).
6. CMS Energy Corporation (NYSE:CMS)
Number of Hedge Fund Holders: 28
CMS Energy Corporation (NYSE:CMS) deals in the generation and distribution of electricity to millions of customers in Michigan, and also engages in the distribution, transmission and storage of natural gas. The company deals in the development of renewable energy as well, producing more than half of its energy from green sources. As part of its plan to eliminate coal usage by 2025 and go carbon-neutral by 2040, CMS Energy Corporation (NYSE:CMS) recently announced that it would purchase 300 MW of clean energy generated from two solar farms in Michigan, which will start operations by end of 2024.
Investors were seen loading up on CMS Energy Corporation (NYSE:CMS) stock. At the close of Q1 2022, 28 hedge funds were long on the company shares, as compared to 25 hedge funds a quarter earlier. The aggregate value of Q1 hedge fund holdings was recorded at $511.6 million. The firm’s largest shareholder in the first quarter was Zimmer Partners, with 2.69 million shares valued at more than $188 million.
On June 27, BMO Capital analyst James Thalacker maintained an ‘Outperform’ rating on CMS Energy Corporation (NYSE:CMS) shares, and revised the price target to $71 from $80. He remains positive on the firm’s recent regulatory announcements given that they de-risk two out of three of the company’s regulatory proceedings, and also put into focus Michigan’s continued “constructive regulatory environment.” The analyst also cited CMS Energy Corporation’s (NYSE:CMS) consistent execution, above-average EPS growth rates, and a long-dated visible capital program.
CMS Energy Corporation’s (NYSE:CMS) EPS for the first quarter stood at $1.20, above market forecasts by $0.08. Revenue of $2.37 billion also beat analysts’ expectations by $289.4 million. The company boasts a 15-year track record of consistent dividend growth, and pays a 2.78% yield as of June 27. CMS Energy Corporation (NYSE:CMS) stock has posted gains of 10.30% in the last 12 months, and 2.56% in the last 6 months, highlighting its resilience to the larger market sell-off.
CMS Energy Corporation (NYSE:CMS) is a good defensive stock to buy, along with names such as Johnson & Johnson (NYSE:JNJ), Exxon Mobil Corporation (NYSE:XOM), and The Procter & Gamble Company (NYSE:PG).
5. DTE Energy Company (NYSE:DTE)
Number of Hedge Fund Holders: 28
As the economy heads towards a recession, Wells Fargo recently announced its stock picks for a recession portfolio, and DTE Energy Company (NYSE:DTE) ranked among the utility stocks on the list. The Michigan-based firm generates and provides electricity, as well as gas to clients in Southeastern Michigan. The company also deals in the provision of wastewater treatment services, chilled water production, metallurgical coke, and compressed air to industrial customers. As of June 27, it pays a 2.85% yield to shareholders, and has posted gains of 11.56% in the last 12 months.
In the first quarter of 2022, DTE Energy Company (NYSE:DTE) reported earnings per share of $2.31, outperforming estimates by $0.23. Revenue of $4.58 billion for the quarter showed year-on-year growth of 21.15% and also beat analysts’ predictions by $1.04 billion.
4. Ameren Corporation (NYSE:AEE)
Number of Hedge Fund Holders: 28
Ameren Corporation (NYSE:AEE) deals in the production and transmission of electricity to consumers in Missouri and Illinois, as well as the distribution and transmission of natural gas. The company generates its power through a mix of conventional and renewable sources, and on June 27 announced that it was acquiring its largest ever solar power facility, a 200 MW setup in central Missouri. Ameren Corporation (NYSE:AEE) was another utility firm that featured in Wells Fargo’s list of recession stocks to buy.
On June 3, Argus analyst Marie Ferguson raised the firm’s price target on Ameren Corporation (NYSE:AEE) to $102 from $95 and maintained a ‘Buy’ rating on the shares. The analyst notes that Ameren is the beneficiary of a more favorable regulatory environment and steady rate base growth, and that company management projects 7% CAGR (compound annual growth rate) in its rate base through 2026. Ferguson is bullish on the company’s future growth prospects, and reaffirmed her $4.35 EPS estimate for 2023.
For Q1 2022, Ameren Corporation (NYSE:AEE) posted a $1.88 billion revenue, up 20% from the year-ago quarter and beating estimates by $266.9 million. EPS came in-line with estimates. As of June 27, the company offers a 2.65% yield to shareholders, and has increased its dividend payout for 8 years in a row. It has also registered gains of 8.61% in the last 12 months.
3. Public Service Enterprise Group Incorporated (NYSE:PEG)
Number of Hedge Fund Holders: 31
Public Service Enterprise Group Incorporated (NYSE:AEE) is one of the best electric utility stocks to buy now, according to Goldman Sachs and Wells Fargo, as both featured the company in their lists of stable stocks to buy in the current environment. It is a New Jersey-based utility company which provides electricity and gas to customers across the Northeastern and Mid-Atlantic United States.
On April 12, Wells Fargo analyst Neil Kalton reiterated an ‘Overweight’ rating on Public Service Enterprise Group Incorporated (NYSE:AEE) shares and bumped the price target to $87 from $82, noting that the backdrop for nuclear power continues to improve.
2. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 32
Duke Energy Corporation (NYSE:DUK) is next up on our list of the best electric utility stocks to buy. It deals in the transmission of electricity and gas to residential, commercial and industrial customers in North Carolina, South Carolina, Indiana, Florida, Ohio, and Kentucky. It generates its electricity through a combination of coal, natural gas, nuclear fuel, hydroelectric, as well as solar and wind setups.
KeyBanc analyst Sophie Karp in April reiterated an ‘Overweight’ rating on Duke Energy Corporation (NYSE:DUK) shares, and increased the price target to $119 from $110. As a core utility investment experiencing significant tailwinds in customer growth in its core markets, the analyst thinks that Duke is well-positioned in the market and warrants a premium to its large cap peers. Wells Fargo recently mentioned Duke Energy Corporation (NYSE:DUK) among the utility stocks to buy right now as the economy nears a recession.
For Q1 2022, Duke Energy Corporation (NYSE:DUK) posted a revenue of $7.13 billion, increasing 15.97% from the year-ago quarter and also outperforming analysts’ predictions by approximately $808 million. The company pays a solid 3.75% yield as of June 27, and has paid a dividend since 2006.
In the first quarter, Jim Simons’ Renaissance Technologies held 1.66 million shares of Duke Energy Corporation (NYSE:DUK) worth $185.6 million, making it the firm’s leading shareholder. Overall, 32 hedge funds were bullish on the utility firm at the close of the first quarter, with aggregate positions worth $1.04 billion.
1. American Electric Power Company, Inc. (NYSE:AEP)
Number of Hedge Fund Holders: 33
Finally there’s American Electric Power Company, Inc. (NYSE:AEP), a utility holding company based in Ohio which provides electricity to approximately 5.5 million customers across 11 states. It provides wholesale electricity to other utilities and municipalities as well. The company generates its electricity through a mix of renewable and non-renewable energy sources. American Electric Power Company, Inc. (NYSE:AEP) is undergoing one of the fastest transitions to green energy in the United States, with a number of renewable energy projects set to unveil in the near future.
American Electric Power Company, Inc. (NYSE:AEP) disclosed an EPS of $1.22 for the first quarter, beating consensus estimates by $0.02. The company’s revenue of $4.6 billion for the quarter also exceeded analysts’ predictions by nearly $200 million and represented year-on-year growth of 7.3%
In late April, Credit Suisse analyst Nicholas Campanella initiated coverage of American Electric Power Company, Inc. (NYSE:AEP) with an ‘Outperform’ rating and a price target of $113. Campanella believes investors should focus on the firm’s strategic pivot of divesting under-earning, low multiple assets. AEP has increased its dividend payments for 17 years in a row, and pays a 3.28% yield as of June 27.
33 out of the 912 hedge funds tracked by Insider Monkey at the close of the first quarter were long American Electric Power Company, Inc. (NYSE:AEP), with combined stakes worth $429.8 million. With a position consisting of 1.2 million shares valued at around $120 million, Millennium Management was the most prominent Q1 shareholder of American Electric Power Company, Inc. (NYSE:AEP).
ClearBridge Investments discussed American Electric Power Company, Inc. (NASDAQ:AEP) in its Q1 2022 investor letter, stating:
“About 5% of the portfolio is in transitioning power companies, typically migrating from coal to renewables. We have been active in encouraging these transitions and added a new position in American Electric Power (NASDAQ:AEP). AEP has the fastest planned renewable energy ramp in the U.S., with plans to both shrink coal and grow renewables by 50% each by 2030. This would drive an 80% emissions reduction, while supporting high single-digit earnings growth at a double-digit return.”
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