In this article, we take a look at 12 most profitable utility stocks now.
In this article, we discuss utility companies in the United States.
Utility companies provide essential services such as electricity, natural gas, and water.
Given how essential the services are, many utility companies in the U.S. are regulated by the government in the United States. In exchange for providing services, many regulated utilities can get a return on their rate base decided by regulators.
Sometimes the return on their rate base is better than expected. Sometimes the return on their rate base is worse than expected.
S&P Global explains rate base,
A utility’s rate base is essentially the company’s “prudent” capital investment, as determined by the applicable regulatory authority’s net of accumulated depreciation. Stated differently, it is the net asset base from which the utility provides electric, gas or water service, and upon which the utility is allowed to earn a rate of return, usually the company’s weighted average cost of capital. Thus, the rate base value is a key variable in the determination of a utility’s revenue requirement.
While there are many utilities that are regulated in the United States, there are also many deregulated utilities or unregulated utilities in the United States that don’t get a return on their rate base, however, as competition ultimately decides how well they do.
Regulations are also different in countries outside of the United States as every country is different in terms of how they regulate their utilities.
Renewable Energy
Given the need to invest in new renewable energy infrastructure to meet emission regulations, some leading regulated utilities have increased their rate base as a result. The increase in their rate base has allowed them to increase earnings.
In terms of green energy, electric utility companies have also faced more competition as rooftop solar adoption has increased and increasing heat pumps adoption has also represented competition for natural gas companies. The effect of the competition is different for each utility, however, depending on whether a utility is regulated or deregulated, the effect of the regulations, and many other factors. In the long term, utilities may need to innovate to adjust to the changes. In the near term, however, many of the leading regulated utilities do have EPS growth potential if regulators allow them to grow their earnings.
Although leading regulated utility companies do have earnings growth potential in the near term, events like wildfires like what occurred to PG&E could affect the utility’s value and the industry does face more competition in the long term. As a result, it could be a good idea for long term investors to own a well diversified portfolio of leading stocks across many different sectors.
Given the high inflation, the Federal Reserve has raised interest rates substantially in 2022. As a result, U.S. treasury yields have increased considerably and substantial capital has moved from leading equities into the U.S. Treasury market. The capital outflow has decreased valuations for many stocks including many utilities.
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Methodology
For our list of 12 Most Profitable Utility Stocks Now, we took the 15 most valuable utilities in the United States by market capitalization and we ranked them by the amount of net income (TTM) they had according to YCharts.
Of the 15, we took the top 12.
Because some companies have not posted their earnings results for Q4, the trailing twelve months for different companies might not be the same time frames as some could end in September 30 and some could end in December 31. Because we used YCharts data, the net income might not be adjusted income either.
12 Most Profitable Utility Stocks Now
12. American Water Works Company, Inc. (NYSE:AWK)
Net Income (TTM) as of September 30, 2022: $1.318 billion
American Water Works Company, Inc. (NYSE:AWK) is the largest and most geographically diverse U.S. publicly traded water and wastewater utility company. In terms of its operations, the company provides regulated and regulated-like drinking water and wastewater services to around 14 million people in 24 states. For the trailing twelve months ended September 30, 2022, American Water Works Company, Inc. (NYSE:AWK) was also one of the most profitable water utilities in America with net income of $1.318 billion according to YCharts. Given its relative stability, the company has increased its annual dividend for 13 straight years. As of 2/13, the stock has a dividend yield of 1.74%.
Alongside Duke Energy Corporation (NYSE:DUK), The Southern Company (NYSE:SO), and NextEra Energy, Inc. (NYSE:NEE), American Water Works Company, Inc. (NYSE:AWK) was one of the most profitable utility companies in the United States last year.
11. Eversource Energy (NYSE:ES)
Net Income (TTM) as of September 30, 2022: $1.391 billion
Eversource Energy (NYSE:ES) a leading provider of electric, gas, and water service in New England that had net income of $1.391 billion in the last four quarters as of September 30, 2022 according to YCharts. For Q3, Eversource Energy (NYSE:ES) had earnings of $1 per share, up from earnings of $0.82 per share in Q3 2021. The company also said in November, “Eversource Energy also today reaffirmed its long-term EPS growth rate from its existing regulated businesses in the upper half of 5-7 percent, using the $3.86 per share1 earned in 2021 as a base.” Although Eversource Energy (NYSE:ES)’s net income has increased, the utility’s stock has declined 5.2% in the last year as the rising Treasury yields have led to some lower valuations for leading dividend companies.
10. WEC Energy Group, Inc. (NYSE:WEC)
Net Income (TTM) as of December 31, 2022: $1.409 billion
WEC Energy Group, Inc. (NYSE:WEC) is one of the Midwest’s largest electric and gas utilities with over 4.6 million customers across Wisconsin, Illinois, Michigan, and Minnesota. In the past, the company has had a history of earnings growth with around 9% CAGR from 2004 to 2023. In 2022, WEC Energy Group, Inc. (NYSE:WEC) had net income of $1.409 billion according to YCharts and for 2023, the company estimates it will earn $4.58-$4.62 per share.
For the fourth quarter of 2022 WEC Energy Group, Inc. (NYSE:WEC) had net income of $252.7 million, compared to earnings of $224.2 million for the fourth quarter of 2021. On January 19, 2023, the company’s board of directors declared a quarterly cash dividend of $0.78 per share, an increase of 7.2% over the previous year’s quarterly dividend.
9. Consolidated Edison, Inc. (NYSE:ED)
Net Income (TTM) as of September 30, 2022: $1.694 billion
Consolidated Edison, Inc. (NYSE:ED) provides energy products and services through various subsidiaries including Con Edison of New York which provides electric service to 3.3 million customers and gas service to around 1.1 million customers. For the trailing twelve months ended September 30, 2022, Consolidated Edison, Inc. (NYSE:ED) had net income of $1.694 billion. In the last 10 years, Consolidated Edison, Inc. (NYSE:ED) has rallied from $60 per share in 2013 to $92.80 per share as of 2/13.
8. Xcel Energy Inc. (NASDAQ:XEL)
Net Income (TTM) as of December 31, 2022: $1.736 billion
Xcel Energy Inc. (NASDAQ:XEL) is a regulated electric and gas delivery company that services around 3.7 million electricity and 2.1 million natural gas customers. In 2022, Xcel Energy Inc. (NASDAQ:XEL) had net income of $1.736 billion according to YCharts, ranking #8 on our list of 12 Most Profitable Utility Stocks Now. Shares of Xcel Energy Inc. (NASDAQ:XEL) have more than doubled from their 2013 levels and the stock has a dividend yield of 2.84% as of 2/13. For 2023, Xcel Energy Inc. (NASDAQ:XEL) reaffirms EPS guidance of $3.30 to $3.40 per share.
7. PG&E Corporation (NYSE:PCG)
Net Income (TTM) as of September 30, 2022: $1.773 billion
PG&E Corporation (NYSE:PCG) is one of the largest combined natural gas and electric energy companies in the United States with 5.5 million electric customer accounts and 4.5 million natural gas customer accounts. For the trailing twelve months ended September 30, 2022, PG&E Corporation (NYSE:PCG) had net income of $1.773 billion according to YCharts. In 2019, the company filed for Chapter 11 bankruptcy given the California wildfires in 2017 and 2018 and PG&E Corporation (NYSE:PCG) reemerged from bankruptcy in 2020.
6. Exelon Corporation (NASDAQ:EXC)
Net Income (TTM) as of September 30, 2022: $2.129 billion
Exelon Corporation (NASDAQ:EXC) is a utility company that serves over 10 million customers through six fully regulated transmission and distribution utilities. In November 2022, the company narrowed its 2022 EPS guidance range to $2.21 to $2.29 per share, and reaffirmed its 6-8% earnings per share growth guidance from 2021-2025. With trailing twelve month net income of $2.129 billion as of September 30, 2022, Exelon Corporation (NASDAQ:EXC) ranks #6 on our list of 12 Most Profitable Utility Stocks Now.
Like Exelon Corporation (NASDAQ:EXC), Duke Energy Corporation (NYSE:DUK), The Southern Company (NYSE:SO), and NextEra Energy, Inc. (NYSE:NEE) were among the most profitable utility companies in the United States in 2022.
5. Sempra (NYSE:SRE)
Net Income (TTM) as of September 30, 2022: $2.305 billion
Sempra (NYSE:SRE) is a leading energy infrastructure company with more than 20,000 employees and total assets of $72 billion at the end of 2021 that helps deliver energy to over 40 million consumers across North America. In terms of net income, Sempra (NYSE:SRE) had net income of $2.305 billion in the trailing twelve months as of September 30, 2022. In November, 2022, Sempra (NYSE:SRE) raised its FY 2022 adjusted EPS guidance range to $8.70-$9 and management also affirmed FY 2023 EPS guidance range of $8.60-$9.20.
4. American Electric Power Company, Inc. (NASDAQ:AEP)
Net Income (TTM) as of September 30, 2022: $2.462 billion
American Electric Power Company, Inc. (NASDAQ:AEP) is one of the largest electric companies in the United States with 26,000 megawatts of diverse generating capacity and a transmission network of more than 40,000 miles. As a utility, American Electric Power Company, Inc. (NASDAQ:AEP) also services around 5.5 million customers across 11 states. In terms of profitability, American Electric Power Company, Inc. (NASDAQ:AEP) had net income of $2.462 billion in the trailing twelve months ended September 30, 2022 according to YCharts.
3. Duke Energy Corporation (NYSE:DUK)
Net Income (TTM) as of December 31, 2022: $2.669 billion
Duke Energy Corporation (NYSE:DUK) is one of America’s largest holding companies with 8.2 million electric utility customers and 1.6 million natural gas customers through its subsidiaries. In terms of 2022, Duke Energy Corporation (NYSE:DUK) was also one of the most profitable utilities in the United States with net income of $2.669 billion according to YCharts, ranking #3 on our list of 12 Most Profitable Utility Stocks Now. For the future, In terms of the future, Duke Energy Corporation (NYSE:DUK) sees earnings growth of between 5% and 7% through 2027 off the midpoint 2023 guidance range of $5.65 per share based on adjusted EPS according to its fourth quarter 2022 earnings review and business update.
2. The Southern Company (NYSE:SO)
Net Income (TTM) as of September 30, 2022: $3.411 billion
The Southern Company (NYSE:SO) is a leading utility that’s one of the largest producers of electricity in the United States and also the largest wholesale provider of electricity in the Southeast. Furthermore, The Southern Company (NYSE:SO) provides natural gas, fiber optics and wireless communications in its other businesses. For the trailing twelve months ended September 30, 2022, The Southern Company (NYSE:SO) had net income of $3.411 billion, which more than covers the company’s annual dividend of $2.72 per share currently. Given increasing earnings, the company has raised its annual dividend for 21 consecutive years.
1. NextEra Energy, Inc. (NYSE:NEE)
Net Income (TTM) as of December 31, 2022: $4.147 billion
NextEra Energy, Inc. (NYSE:NEE) ranks #1 on our list of 12 Most Profitable Utility Stocks Now with net income of $4.147 billion in 2022. The utility owns Florida Power & Light Company which provides electricity to over 12 million people across Florida. Furthermore, NextEra Energy, Inc. (NYSE:NEE) also owns a clean energy business, “NextEra Energy Resources, LLC, which, together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage. Through its subsidiaries, NextEra Energy generates clean, emissions-free electricity from seven commercial nuclear power units in Florida, New Hampshire and Wisconsin.”
ClearBridge Investments commented on NextEra Energy, Inc. (NYSE:NEE) in a Q3 2022 investor letter,
NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy.
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Disclosure: None. 12 Most Profitable Utility Stocks Now is originally published on Insider Monkey.
