10 Best Utility Dividend Stocks To Buy

In this article, we discuss 10 best utility dividend stocks to buy.

In 2022, the electric power industry will continue to move towards a cleaner, more resilient grid. As the US economy started to recover from its pandemic-driven recession, electricity sales grew 3.8% through August 2021 compared to the prior year. The electric power industry is undergoing decarbonization, digitalization, and decentralization. 

Heading into the last quarter of 2021, 46 out of 54 American investor-owned utility firms had pledged to lower carbon emissions, and many set a target of net zero carbon by 2050. In 2022, even more utilities jumped on board and reaffirmed commitments, driven by consumer support, chances for adding value, advanced environmental, social, and governance (ESG) targets, growing clean energy mandates, and potential federal subsidies. 

The global utilities market grew from $5,488.88 billion in 2021 to $5,937.42 billion in 2022 at a compound annual growth rate (CAGR) of 8.2%. The utilities sector is forecasted to grow to $7,376.5 billion in 2026 at a compound annual growth rate of 5.6%. The swift growth and significant investments in renewable power generation facilities is anticipated to support the advancement of the utilities industry during the forecast period. To benefit from the utilities sector, which is known for paying generous dividends, some of the best stocks include NextEra Energy, Inc. (NYSE:NEE), The AES Corporation (NYSE:AES), and Dominion Energy, Inc. (NYSE:D). 

Our Methodology 

We selected the following utility dividend stocks based on positive analyst coverage, strong business fundamentals, and solidity of dividend profiles. The dividend yields as of October 28 have been mentioned. We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022. 

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Best Utility Dividend Stocks To Buy

10. Fortis Inc. (NYSE:FTS)

Number of Hedge Fund Holders: 9

Dividend Yield as of October 28: 4.27%

Fortis Inc. (NYSE:FTS) operates as an electric and gas utility company in Canada, the United States, and the Caribbean countries. The company was founded in 1885 and is headquartered in St. John’s, Canada. The company expects its long-term growth to support earnings and dividend increases, while lowering its dividend payout ratio over time to reach historical levels. The dividend growth guidance of 4%-6% annually through 2027 will also offer the flexibility to finance more capital with internally raised funds. 

On September 28, Fortis Inc. (NYSE:FTS) declared a C$0.565 per share quarterly dividend, a 5.6% increase from its prior dividend of C$0.535. The dividend is payable on December 1, to shareholders of record as of November 17. Fortis Inc. (NYSE:FTS) also posted Q3 2022 results which were ahead of Wall Street consensus. 

Raymond James analyst David Quezada on October 19 upgraded Fortis Inc. (NYSE:FTS) to Outperform from Market Perform with a C$58 price target. The analyst now sees attractive value in the low-risk regulated name. 

According to Insider Monkey’s second quarter database, Fortis Inc. (NYSE:FTS) was part of 9 hedge fund portfolios, compared to 10 in the prior quarter. Rajiv Jain’s GQG Partners is the leading position holder in the company, with 9.3 million shares worth $442 million. 

Like NextEra Energy, Inc. (NYSE:NEE), The AES Corporation (NYSE:AES), and Dominion Energy, Inc. (NYSE:D), Fortis Inc. (NYSE:FTS) is one of the best utility dividend stocks to invest in. 

9. Spire Inc. (NYSE:SR)

Number of Hedge Fund Holders: 16

Dividend Yield as of October 28: 3.93%

Spire Inc. (NYSE:SR) is based in St. Louis, Missouri, and the company is engaged in the purchase, distribution, and sale of natural gas to residential, commercial, industrial, and other end-users of natural gas in the United States. Spire Inc. (NYSE:SR) paid a $0.685 per share quarterly dividend to shareholders on October 4 and it has a dividend yield of nearly 4% as of October 28. Spire Inc. (NYSE:SR) is one of the premier dividend stocks to invest in. 

On September 9, JPMorgan analyst Richard Sunderland upgraded Spire Inc. (NYSE:SR) to Overweight from Neutral with a price target of $78, up from $74. “Recent Staff testimony in Spire’s Missouri rate case appears consistent with company efforts to address a narrow scope of issues lingering from the utility’s disappointing 2021 rate outcome”, the analyst told investors in a research note. He is now “cautiously optimistic” on the company and the risk/reward outlook with Spire Inc. (NYSE:SR)’s current valuation “appears compelling”.

According to Insider Monkey’s data, 16 hedge funds were long Spire Inc. (NYSE:SR) at the end of Q2 2022, compared to 18 funds in the preceding quarter. Sander Gerber’s Hudson Bay Capital Management is the largest stakeholder of the company, with 195,000 shares valued at $14.50 million. 

Here is what Miller Howard Investments has to say about Spire Inc. (NYSE:SR) in its Q3 2021 investor letter:

“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. We also added Spire Inc. (SR) which trades at a heavily discounted multiple, reflecting a worst-case scenario on one of its pipelines.”

8. Atmos Energy Corporation (NYSE:ATO)

Number of Hedge Fund Holders: 21

Dividend Yield as of October 28: 2.54%

Atmos Energy Corporation (NYSE:ATO) is a Texas-based company involved in the regulated natural gas distribution, pipeline transportation, and storage businesses in the United States. Atmos is positioned to generate upper single-digit profit and dividend growth. It is one of the best dividend stocks to consider. 

On October 14, Credit Suisse analyst Nicholas Campanella maintained an Outperform rating on Atmos Energy Corporation (NYSE:ATO) but trimmed the price target on the shares to $105 from $131 ahead of the company’s year-end update. The analyst expects Atmos Energy Corporation (NYSE:ATO) to reiterate and expand its 6%-8% long-term EPS CAGR, offer FY23 guidance in-line with Street expectations, confirm dividend growth of 8%-9%, and deliver updated CapEx and financing considerations. 

According to Insider Monkey’s second quarter database, 21 hedge funds held stakes worth $852.5 million in Atmos Energy Corporation (NYSE:ATO), compared to 16 funds in the earlier quarter worth $636 million. Ken Griffin’s Citadel Investment Group is a notable position holder in the company, with 700,617 shares valued at $78.5 million. 

Here is what Aristotle Capital Management Value Equity has to say about Atmos Energy Corporation (NYSE:ATO) in its Q1 2022 investor letter: 

“Headquartered in Dallas, Atmos Energy is the largest fully regulated natural gas-only utility in the U.S. It serves over three million distribution customers across eight states, primarily in the South. Approximately 70% of its revenue comes from Texas, where it owns one of the largest natural gas pipeline systems in the state.

High-Quality Business

Some of the quality characteristics we have identified for Atmos Energy include:

-Strong balance sheet and financial strength, perhaps most visible during 2021’s winter storm Uri when millions of Texans lost power. The significant spikes in natural gas prices stressed distributors, but Atmos handled over $2 billion of incremental costs with little long-term impact;

-Experienced and shareholder-friendly management team, as demonstrated by 38 consecutive years of dividend increases; and

-Attractive demographics and favorable regulatory environments in the states where it operates.

Attractive Valuation

Given our estimates of higher normalized earnings and dividend payments, we believe shares of Atmos Energy are trading at a discount relative to our estimate of their intrinsic value.

Compelling Catalysts

Catalysts we have identified for Atmos Energy, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:

-Old pipes and aging infrastructure, coupled with a growing population, have created a large backlog of safety and maintenance projects – completion of which should drive earnings growth and steady dividend increases. Updates should both increase reliability as well as the value of Atmos Energy’s assets, enhancing profit levels permitted by regulators;

-Well positioned to source low-cost natural gas from prolific basins in Texas to its distribution network, helping to keep customer prices down and economically favorable relative to other sources of energy; and

-Advantageous regulatory environment should continue to support rate adjustments so that revenues are earned on capital projects within six to 12 months.”

7. CenterPoint Energy, Inc. (NYSE:CNP)

Number of Hedge Fund Holders: 27

Dividend Yield as of October 28: 2.50%

CenterPoint Energy, Inc. (NYSE:CNP) was founded in 1866 and is headquartered in Houston, Texas. It operates as a public utility holding company in the United States, working through Electric and Natural Gas segments. On September 29, CenterPoint Energy, Inc. (NYSE:CNP) declared a $0.18 per share quarterly dividend, in line with previous. The dividend is payable on December 8, to shareholders of the company as of November 17. CenterPoint Energy, Inc. (NYSE:CNP) is one of the top dividend stocks to monitor. 

On October 24, Guggenheim analyst Shahriar Pourreza maintained a Buy recommendation on CenterPoint Energy, Inc. (NYSE:CNP) but lowered the firm’s price target on the shares to $30 from $35. The analyst updated select estimates ahead of Q3 earnings season from the Power and Utilities group to reflect “known and measurable year-over-year items,” to factor in seasonality and re-mark to the latest commodity curves. 

Among the hedge funds tracked by Insider Monkey, CenterPoint Energy, Inc. (NYSE:CNP) was part of 27 public stock portfolios at the end of June 2022, up from 23 funds in the preceding quarter. Israel Englander’s Millennium Management is the biggest shareholder of the company, with 1.65 million shares worth $49 million. 

Here is what Miller Howard Investments has to say about CenterPoint Energy, Inc. (NYSE:CNP) in its Q3 2021 investor letter:

“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.”

6. Sempra (NYSE:SRE)

Number of Hedge Fund Holders: 29

Dividend Yield as of October 28: 3.01%

Sempra (NYSE:SRE), a California-based energy holding company specializing in electric services and natural gas, is one of the best dividend stocks to monitor. The company delivered a $1.145 per share quarterly dividend to shareholders on October 15. Sempra (NYSE:SRE) announced on October 20 that Port Arthur LNG and Bechtel have updated the engineering, procurement, and construction contract for the proposed Phase 1 liquefaction project in Texas, which is valued at nearly $10.5 billion.

On October 24, Guggenheim reiterated a Buy rating on Sempra (NYSE:SRE) but slashed the firm’s price target on the shares to $165 from $174. Analyst Shahriar Pourreza issued the ratings update. 

According to Insider Monkey’s data, 29 hedge funds held stakes worth $285.3 million in Sempra (NYSE:SRE) at the end of the second quarter of 2022, compared to 23 funds in the last quarter worth $209.15 million. Jim Simons’ Renaissance Technologies is a significant position holder in the company, with 270,000 shares valued at $40.6 million. 

In addition to NextEra Energy, Inc. (NYSE:NEE), The AES Corporation (NYSE:AES), and Dominion Energy, Inc. (NYSE:D), Sempra (NYSE:SRE) is one of the best utility dividend stocks to buy according to elite hedge funds. 

Here is what ClearBridge Investments Large Cap Value Strategy has to say about Sempra (NYSE:SRE) in its Q1 2022 investor letter:

“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.”

5. Dominion Energy, Inc. (NYSE:D)

Number of Hedge Fund Holders: 30

Dividend Yield as of October 28: 3.85%

Dominion Energy, Inc. (NYSE:D) is headquartered in Richmond, Virginia, and the company produces and distributes regulated electricity and natural gas to residential, commercial, industrial, and government customers in Virginia and North Carolina. On October 17, Dominion Energy, Inc. (NYSE:D) filed a proposal with the Virginia State Corporation Commission for approximately 24 new solar and energy storage projects for Virginia customers, which would offer over 800 MW of carbon-free electricity. 

Guggenheim analyst Shahriar Pourreza on October 24 maintained a Buy recommendation on Dominion Energy, Inc. (NYSE:D) but trimmed the price target on the shares to $75 from $90. The analyst reduced the baseline utility valuation, primarily supported by a sharp rise in interest rates and forward yield expectations.

According to the second quarter database of Insider Monkey, 30 hedge funds were long Dominion Energy, Inc. (NYSE:D), compared to 34 funds in the preceding quarter. Ric Dillon’s Diamond Hill Capital is the largest position holder in the company, with 3.3 million shares worth $262.85 million. 

4. Entergy Corporation (NYSE:ETR)

Number of Hedge Fund Holders: 30

Dividend Yield as of October 28: 3.75%

Entergy Corporation (NYSE:ETR) is a Louisiana-based company engaged in the production and retail distribution of electricity in the United States. The company operates through two segments – Utility and Entergy Wholesale Commodities. On October 28, Entergy Corporation (NYSE:ETR) declared a $1.07 per share quarterly dividend, a 5.9% increase from its last dividend of $1.01. The dividend was distributed on December 1, to shareholders of record on November 14. Entergy Corporation (NYSE:ETR)’s dividend yield on October 28 came in at 3.75% and it is one of the best dividend stocks to buy. 

Guggenheim analyst Shahriar Pourreza on October 24 reiterated a Buy rating on  Entergy Corporation (NYSE:ETR) and lowered the price target on the shares to $117 from $129. The analyst refreshed select estimates ahead of Q3 earnings season from the Power and Utilities group to factor in “known and measurable year-over-year items”.

According to Insider Monkey’s data, 30 hedge funds were bullish on Entergy Corporation (NYSE:ETR) at the end of Q2 2022, compared to 29 funds in the earlier quarter. Michael Gelband’s ExodusPoint Capital is the largest stakeholder of the company, with 1.2 million shares worth $137 million. 

3. Eversource Energy (NYSE:ES)

Number of Hedge Fund Holders: 32

Dividend Yield as of October 28: 3.32%

Eversource Energy (NYSE:ES) is a Massachusetts-based public utility holding company, engaged in the energy delivery business. The company operates through Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution segments. Eversource Energy (NYSE:ES) distributed a $0.6375 per share quarterly dividend to shareholders on September 30. With a dividend yield of 3.32% as of October 28, Eversource Energy (NYSE:ES) is one of the best dividend stocks to invest in. 

On October 24, Guggenheim assigned a Buy rating to Eversource Energy (NYSE:ES) and lowered the firm’s price target on the shares to $82 from $97. Analyst Shahriar Pourreza issued the ratings update.

According to Insider Monkey’s Q2 data, 32 hedge funds were long Eversource Energy (NYSE:ES), with collective stakes worth $705.6 million, compared to 29 funds in the prior quarter worth $910.2 million. Stuart J. Zimmer’s Zimmer Partners is the biggest position holder in the company, with more than 2 million shares valued at $172.5 million. 

2. The AES Corporation (NYSE:AES)

Number of Hedge Fund Holders: 37

Dividend Yield as of October 28: 2.39%

The AES Corporation (NYSE:AES) is headquartered in Arlington, Virginia, operating as a diversified power generation and utility company. The company also owns and operates utilities to generate, purchase, transmit, and sell electricity to customers in the residential, commercial, industrial, and governmental sectors. On October 7, The AES Corporation (NYSE:AES) declared a quarterly dividend of $0.158 per share, in line with previous. The dividend is payable on November 15, to shareholders of record on November 1. The AES Corporation (NYSE:AES)’s dividend yield on October 28 stood at 2.39%. 

On August 18, Morgan Stanley analyst Stephen Byrd raised the price target on The AES Corporation (NYSE:AES) to $32 from $29.50 and kept an Overweight rating on the shares. The analyst lifted growth rates for solar, wind, energy storage, and clean hydrogen, and boosted price targets on many clean tech stocks, given the clean energy support from the new Inflation Reduction Act of 2022.

According to Insider Monkey’s data, 37 hedge funds were bullish on The AES Corporation (NYSE:AES) at the end of June 2022, with collective stakes worth $1.14 billion. William B. Gray’s Orbis Investment Management is the biggest position holder in the company, with 17.6 million shares valued at $369.5 million. 

Massif Capital made the following comment about The AES Corporation (NYSE:AES) in its Q3 2022 investor letter:

“Roughly 11% of the portfolio is allocated to U.S. utility The AES Corporation (NYSE:AES) and Canadian independent power producer Polaris Renewable Energy. Both positions have had modest performance this year. Polaris has been more volatile than is justified by the underlying business, putting in an all-time high this year at the beginning of August before tumbling 30.0%. AES has been far more stable and traded in a tighter range but is also down for the year by 5.4%, inclusive of reinvesting the dividends into treasury bills.

AES has continued to build its robust pipeline of energy projects and its strong backlog of signed power purchase agreements (PPAs). Currently, AES has 3.8 GW of renewables with signed PPAs under construction, 6.7 GW of signed PPAs for which building has yet to start, and a total development pipeline of 59 GW as of the start of 2022. Of note is that energy storage projects now make up 18% of that pipeline, with roughly 50% of PPA’s including some storage component.

AES continues to lag some of its peers on a multiple basis, which offers the opportunity for relative and absolute outperformance but raises questions about what the market may be concerned by. Solar supply chain issues are the best explanation for short-term underperformance, but on a two-year basis, AES trades at a roughly 30% discount to peers as measured by P/E and a 27% discount measured on an EV/EBIT basis. Balance sheet concerns may drive the discount, but AES has enjoyed several years of steady credit improvement and notched investment grade ratings across the board in the last 24 months. Still, forward-looking leverage levels remain elevated relative to peers. This may be the wedge keeping a lid on relative performance…” (Click here to read the full text)

1. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 59

Dividend Yield as of October 28: 2.15%

NextEra Energy, Inc. (NYSE:NEE) is a Florida-based company that generates, distributes, and sells electric power to retail and wholesale customers in North America. On October 14, NextEra Energy, Inc. (NYSE:NEE) declared a $0.425 per share quarterly dividend, in line with previous. The dividend is payable on December 15, to shareholders of the company as of November 25. NextEra Energy, Inc. (NYSE:NEE)’s dividend yield on October 28 came in at 2.15%. The company also posted market-beating Q3 2022 financial results. It is one of the premier dividend stocks to invest in. 

On October 24, Guggenheim analyst Shahriar Pourreza reaffirmed a Buy on NextEra Energy, Inc. (NYSE:NEE) but lowered the firm’s price target on the stock to $99 from $108. 

Among the hedge funds tracked by Insider Monkey, NextEra Energy, Inc. (NYSE:NEE) was part of 59 public stock portfolios at the end of June 2022, compared to 64 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management is the largest position holder in the company, with 16.2 million shares worth $1.25 billion. 

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NextEra Energy, Inc. (NYSE:NEE) was one of them. Here is what the fund said:

“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc. (NYSE:NEE), an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.

The energy transition would be extremely helpful for climate change and Iberdrola ranks well on our ESG matrix. NextEra, meanwhile, recently raised future earnings forecasts, citing a very favorable macro environment for rapid renewable generation expansion driven by decarbonization of the U.S. economy and the relative attractiveness of renewable generation in the context of high natural gas and power prices.”

You can also take a look at 10 Best Medical Stocks Under $5 and 10 Best Pharma Dividend Stocks To Invest In. 

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Disclosure: None. 10 Best Utility Dividend Stocks To Buy is originally published on Insider Monkey.