In this article, we discuss the 11 best utility stocks to buy now.
The utility sector includes the companies that provide basic services such as water, electricity, and natural gas. The industry is instrumental to our daily lives. However, the sector was negatively affected by the coronavirus crisis.
According to a report published by FutureBridge, a research company, in the first quarter of 2020, the global electricity demand fell 2.5%, compared with Q1 of 2019. Moreover, investors also favored technology, financial, and energy sectors, resulting in the underperformance of the utility sector. The S&P 500 Utilities Index fell 7% in 2020. However, with the robust vaccination process, the utility sector is rebounding to its pre-pandemic levels. According to a paper published by S&PGlobal, in the latter half of 2020, capital spending by the U.S. energy utilities stood at $130 billion, up from $121 billion in 2019.
According to the analysts, the investments in the utility sector tend to remain stable as the demand for these services always remains intact, even during a recession.
eliza-diamond-Iw2oRD2NP2w-unsplash
In the first quarter of 2021, the utility sector remained one of the top-performing sectors in the S&P 500, as the sector gained 7.8% during the quarter, compared with a 4.9% gain of the broader market, according to a report published by Wall Street Journal. Moreover, the electricity demand has increased by 5% as compared with their pre-pandemic levels, offering lucrative opportunities for investors in the sector. Some of the most notable utility stocks include NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM).
Our Methodology:
Let’s analyze our list of the best utility stocks to buy now. We took into account hedge fund sentiment, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Utility companies that pay regular dividends were preferred.
Why pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by wide margins. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Utility Stocks To Buy Now
11. Chesapeake Utilities Corporation (NYSE:CPK)
Number of Hedge Fund Holders: 6
Chesapeake Utilities Corporation (NYSE:CPK) ranks eleventh on our list of the best utility stocks to buy now. It is an American energy company that specializes in the transmission and distribution of natural gas. Along with this, the company also specializes in the generation and distribution of electricity.
In August, Maxim lifted its price target on Chesapeake Utilities Corporation (NYSE:CPK) to $155, while keeping a ‘Buy’ rating on the shares. The firm’s analyst appreciated the company’s new energy delivery projects and expects its natural gas customers to grow by 5%, which would result in the company’s EPS growth.
As of Q2 2021, 6 hedge funds tracked by Insider Monkey have positions in Chesapeake Utilities Corporation (NYSE:CPK), valued at $6.4 million. The number of hedge funds having stakes in the company was the same in the previous quarter.
Like NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM), Chesapeake Utilities Corporation (NYSE:CPK) is also gaining investors’ attention in 2021.
10. Otter Tail Corporation (NASDAQ:OTTR)
Number of Hedge Fund Holders: 8
Otter Tail Corporation (NASDAQ:OTTR) is an American energy company that provides electricity and energy services. Founded in 1907, the company remains one of the best utility stocks to buy now.
Maxim’s analyst Tate Sullivan noted that Otter Tail Corporation (NASDAQ:OTTR) can benefit from the high demand for polyvinyl chloride pipes for the housing market as he lifts his estimates for the company’s FY21 EPS by $0.14. In September, the firm raised its price target on Otter Tail Corporation (NASDAQ:OTTR) to $67, while keeping a ‘Buy’ rating on the shares. In Q2 2021, Otter Tail Corporation (NASDAQ:OTTR) reported revenue of $285.6 million, showcasing a 48.2% year-over-year growth.
On August 11, the company’s board announced a quarterly dividend of $0.39 per share, in-line with the previous, paying an annual yield of 2.74%.
With shares worth $18.9 million, GAMCO Investors is the company’s leading shareholder.
9. CenterPoint Energy, Inc. (NYSE:CNP)
Number of Hedge Fund Holders: 20
CenterPoint Energy, Inc. (NYSE:CNP) is an American electric and natural gas utility company, which delivers electricity, natural gas, and power to its consumers.
Recently, CenterPoint Energy, Inc. (NYSE:CNP) entered into two power purchase agreements for an additional 335 MW of solar energy for its Indiana-based electric and natural gas business. The 335 MW of solar energy will supply electricity to over 70,000 homes in the area. In Q2 2021, CenterPoint Energy, Inc. (NYSE:CNP) posted an EPS of $0.36, beating the estimates by $0.11. For FY21, the company expects the utility EPS in the range of $1.25 to $1.27.
Recently, Barclays upgraded CenterPoint Energy, Inc. (NYSE:CNP) to ‘Overweight’ with a $30 price target, highlighting the company’s strong utility profile. On September 30, the company increased its dividend by 6.3% to $0.017 per share, yielding 2.77%, and has been increasing its dividend for the past two years.
Of the 873 hedge funds tracked by Insider Monkey, 20 hedge funds have positions in CenterPoint Energy, Inc. (NYSE:CNP) in Q2, compared with 25 in the previous quarter. The total value of these stakes is $287.7 million.
8. Evergy, Inc. (NYSE:EVRG)
Number of Hedge Fund Holders: 21
Evergy, Inc. (NYSE:EVRG), one of the best utility stocks to buy now, is an American utility company and the largest supplier of electricity in Kansas, U.S., where it serves over 1.6 million customers. The company’s generating capacity has reached 16,000 MW from its 40 power plants.
On September 20, Evergy, Inc. (NYSE:EVRG) signed an agreement with a broadband solutions company, Anterix, to use its 900 MHz broadband spectrum to deploy a wireless broadband communications network in Kansas and Missouri. In Q2 2021, Evergy, Inc. (NYSE:EVRG) posted an EPS of $0.85, beating the estimates by $0.12. The company’s revenue of $1.24 billion presented a 5.1% year-over-year growth.
This July, Seaport Global initiated its coverage on Evergy, Inc. (NYSE:EVRG) with a ‘Buy’ rating and a $68 price target.
As of Q2 2021, 21 hedge funds have positions in Evergy, Inc. (NYSE:EVRG), valued at $1.03 billion. The number of hedge funds having stakes in the company stood at 30 in the previous quarter. Paul Singer’s Elliot Management is the company’s largest shareholder, with shares worth $637 million.
Like NextEra Energy, Inc. (NYSE:NEE), The Southern Company (NYSE:SO), Duke Energy Corporation (NYSE:DUK), Exelon Corporation (NASDAQ:EXC), and Brookfield Asset Management Inc. (NYSE:BAM), investors and analysts are also paying attention to Evergy, Inc. (NYSE:EVRG).
7. UGI Corporation (NYSE:UGI)
Number of Hedge Fund Holders: 23
UGI Corporation (NYSE:UGI) is an American holding company that specializes in the distribution of natural gas and electric power.
This July, BofA upgraded UGI Corporation (NYSE:UGI) to ‘Buy’ with a $51 price target. The firm’s analyst Richard Ciciarelli noted that the company can benefit from its $1 billion investment in renewables as the market develops in the coming years. On August 4, the company declared a quarterly dividend of $0.345 per share, yielding 2.99%.
In fiscal Q3 2021, UGI Corporation (NYSE:UGI) posted an EPS of $0.13, beating the estimates by $0.06. The company reported revenue of $1.5 billion, up 25% from the prior-year quarter.
As of Q2 2021, 23 hedge funds tracked by Insider Monkey have positions in UGI Corporation (NYSE:UGI), up from 19 in the previous quarter. The total value of these stakes is $275.4 million. First Eagle Investment Management is the company’s leading shareholder with over 9 million shares.
6. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 33
NRG Energy, Inc. (NYSE:NRG) is an American integrated power company that generates electricity and also provides power and energy solutions to its consumers.
This June, Goldman Sachs lifted its price target on NRG Energy, Inc. (NYSE:NRG) to $57 and upgraded the stock to ‘Conviction Buy’. The firm’s analyst Michael Lapides expects a strong free cash flow in 2022, driven by the company’s retail business and resumption of its normal operations.
NRG Energy, Inc. (NYSE:NRG) pays an annual dividend of $1.30 per share, yielding 3.18%.
Of the 873 hedge funds tracked by Insider Monkey, 33 hedge funds have positions in NRG Energy, Inc. (NYSE:NRG) in Q2, compared with 35 in the previous quarter. The total value of these stakes is over $1.9 billion.
5. Brookfield Asset Management Inc. (NYSE:BAM)
Number of Hedge Fund Holders: 34
Brookfield Asset Management Inc. (NYSE:BAM) is an alternative asset management company that focuses on investment in renewable power. The company’s functions involve the distribution of midstream and other products through pipelines and ports. Brookfield Asset Management Inc. (NYSE:BAM) is one of the best utility stocks to buy now.
On September 19, Brookfield Asset Management Inc. (NYSE:BAM) announced to acquire an Australian power infrastructure firm, in a deal worth $7 billion to meet the growing demand for renewable energy. In Q2 2021, Brookfield Asset Management Inc. (NYSE:BAM) reported an FFO of $1.01, beating the estimates by $0.28. The company’s revenue for the quarter stood at $18.29 billion, driven massively by the company’s capital recycling initiatives. This August, BMO Capital lifted its price target on Brookfield Asset Management Inc. (NYSE:BAM) to C$61, while maintaining an ‘Outperform’ rating on the shares. The company pays an annual dividend of $0.52 per share, yielding 0.92% and has been increasing its dividend for the past two years.
As of Q2 2021, 34 hedge funds tracked by Insider Monkey have positions in Brookfield Asset Management Inc. (NYSE:BAM), valued at $1.65 billion. The number of hedge funds having stakes in the company was the same in the previous quarter. Akre Capital Management is the company’s leading shareholder with over 13 million shares.
Baron Funds mentioned Brookfield Asset Management Inc. (NYSE:BAM) in its second-quarter 2021 investor letter. Here is what the firm has to say:
“The shares of long-term holding Brookfield Asset Management Inc. gained 15% in the most recent quarter. The company is a leading alternative asset manager focused on investing in high-quality real estate and infrastructurerelated assets that tend to generate predictable and growing cash flows. We remain bullish about the ongoing prospects for Brookfield given the secular growth opportunity for alternative assets, the company’s many competitive advantages including scale, global capabilities, its well known brand name, operating expertise, and performance track record. We hold management in high regard and believe the shares remain attractively valued.”
4. Exelon Corporation (NASDAQ:EXC)
Number of Hedge Fund Holders: 35
Exelon Corporation (NASDAQ:EXC), one of the best utility stocks to buy, pays an annual dividend of $1.53 per share, yielding 2.83%. It is an American electric power generation company that also owns low-cost power generation fleets. The company has the largest customer base in the U.S.
On September 29, Exelon Corporation (NASDAQ:EXC) announced its plans to invest over $140 million into nuclear plants over the next five years. This investment is aimed to replace transformers and upgrade fiber optic control systems in the concerned areas. In Q2 2021, Exelon Corporation (NASDAQ:EXC) posted an EPS of $0.89, beating the estimates by $0.22. The company’s utilities segment announced to reduce operation-driven emissions by 50% by 2050. Recently, BMO Capital lifted its price target on Exelon Corporation (NASDAQ:EXC) to $55, with an ‘Outperform’ rating on the shares, highlighting the company’s comprehensive clean energy legislation.
As of Q2 2021, 35 hedge funds tracked by Insider Monkey have positions in Exelon Corporation (NASDAQ:EXC), compared with 44 in the previous quarter. These stakes are valued at over $1.1 billion.
3. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 36
Duke Energy Corporation (NYSE:DUK) is American electric power and natural gas holding company that serves over 7.4 million customers in the country. Over 3.87% yield and 14 years of consistent dividend growth make Duke Energy Corporation (NYSE:DUK) one of the best utility stocks to buy now.
As of Q2 2021, 36 hedge funds tracked by Insider Monkey have positions in Duke Energy Corporation (NYSE:DUK), up from 34 in the previous quarter. These stakes are valued at $566.1 million. With 1.2 million shares, D.E. Shaw is the company’s leading shareholder.
2. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 37
The Southern Company (NYSE:SO) is an American gas and utility holding company that also provides wholesale energy and customized energy solutions to its consumers.
In September, Guggenheim lifted its price target on The Southern Company (NYSE:SO) to $72, while upgrading the stock to ‘Buy’. The firm’s analyst Shahriar Pourreza believes that the company is an attractive entry point for investors in 2022 due to its long-term earnings profile.
The Southern Company (NYSE:SO) has increased its dividend by 10.43% in the past three years and pays an annual dividend of $2.64 per share, yielding 4.26%.
As of Q2 2021, 37 hedge funds tracked by Insider Monkey have positions in The Southern Company (NYSE:SO), up from 35 in the previous quarter. These stakes are valued at $606.4 million.
1. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. (NYSE:NEE) tops our list of the best utility stocks to buy now. It is an American energy company with generating capacity reaching 58 GW. The company is the largest generator of renewable energy from wind and sun.
This July, Credit Suisse assumed its coverage on NextEra Energy, Inc. (NYSE:NEE) with an ‘Outperform’ rating and an $85 price target.
NextEra Energy, Inc. (NYSE:NEE) has a track record of 26 years of consistent dividend growth. The company pays an annual dividend of $1.54 per share, yielding 1.98%.
Of the 873 hedge funds tracked by Insider Monkey, 59 hedge funds have positions in NextEra Energy, Inc. (NYSE:NEE) in Q2, compared with 63 in the previous quarter. The total value of these stakes is over $2.6 billion. Fisher Asset Management is the company’s leading shareholder, with shares valued at $1.03 billion.
You can also take a look at Top 10 Electric Utility Dividend Stocks to Buy and 10 Best Electric Utility Stocks to Buy Now
Follow Insider Monkey on Twitter
Suggested articles:
- 15 Largest Utility Companies In The World
- 12 Best Utility Stocks To Buy Now
- 10 Smart Ways To Cut Your Utility Bills
Disclosure. None. 11 Best Utility Stocks to Buy Now is originally published on Insider Monkey.
