In this article, we discuss 10 utility dividend stocks with over 3% yield.
Rising demand and restricted production have resulted in a record increase in energy prices over the past few months. On April 18, natural gas prices jumped more than 10% to a 13-year high, putting pressure on inventory levels across the globe. The utility sector has benefited from this boom. A report by professional services firm PwC highlights that federal policy changes, investor interest, and environmental, social and governance (ESG) efforts in the industry are all likely to be key factors shaping the future of the utilities industry in 2022.
The merger and acquisition activity in this sector is also increasing. In 2021, there were 55 such deals in the power and utilities sector, comparing favorably to 42 in 2020 and 52 in 2019. The total value of these deals stood at close to $50 billion in 2021, up from $48 billion in 2020 and $43 billion in 2019. PwC expects this level of activity in the utilities industry to continue in 2022 amid the rebalancing and rationalization of portfolios in light of inflation and rising interest rates. Corporate deals will likely dominate the headlines in this regard.
Electricity demand in the U.S is also increasing and additional investments are needed to keep up with the latest developments. Research firm Deloitte contends that in-home weatherization and grid-responsive appliances are needed to help manage energy use and shape load. Investors who want to ride this boom in the utilities sector should consider some of the top utility dividend stocks to buy now that include Duke Energy Corporation (NYSE:DUK), Consolidated Edison, Inc. (NYSE:ED), and American Electric Power Company, Inc. (NASDAQ:AEP).
Our Methodology
The companies that operate in the utilities sector and have a forward dividend yield of more than 3% were selected for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. Hedge fund sentiment was included as a classifier as well. Data from the more than 900 elite hedge funds tracked by Insider Monkey was used to quantify the hedge fund sentiment around each stock.
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Utility Dividend Stocks with Over 3% Yield
10. New Jersey Resources Corporation (NYSE:NJR)
Number of Hedge Fund Holders: 8
Forward Dividend Yield: 3.15%
New Jersey Resources Corporation (NYSE:NJR) operates as an energy services holding firm. It has an impressive dividend history stretching back more than three decades. Over the past 27 years, its payouts have registered consistent growth. On April 20, the company declared a quarterly dividend of $0.3625 per share, in line with previous. In its earnings report for the company’s fiscal first quarter of 2022, the firm beat market expectations on earnings per share and revenue by $0.69 and $675 million respectively.
New Jersey Resources Corporation is one of the largest utility firms in New Jersey and has been stepping up its investments in renewables, especially in solar facilities, further cementing the long-term sustainability of its business.
Among the hedge funds tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in New Jersey Resources Corporation with 600,879 shares worth more than $24 million.
Just like Duke Energy Corporation, Consolidated Edison, Inc., and American Electric Power Company, Inc., New Jersey Resources Corporation is one of the utility stocks attracting the attention of elite investors.
9. South Jersey Industries, Inc. (NYSE:SJI)
Number of Hedge Fund Holders: 13
Forward Dividend Yield: 3.60%
South Jersey Industries, Inc. (NYSE:SJI) provides energy-related products and services and boasts 147 miles of service mains in its transmission system. The company has paid a dividend to shareholders consistently for the past 32 years. These payouts have grown over each of the past 16 consecutive years. On March 1, the company declared a quarterly dividend of $0.31 per share, in line with previous. Back in November 2021, the company raised its payout by 2.5% from its previous dividend of $0.3025.
South Jersey Industries, Inc. posted its annual report for fiscal 2021 on February 24, reporting earnings per share of $1.62, in line with previous. The company’s revenue over the period was close to $2 billion, up 29% year-on-year and beating expectations by $240 million.
Among the hedge funds tracked by Insider Monkey, Ohio-based investment firm Diamond Hill Capital is a leading shareholder in South Jersey Industries, Inc. with 2.6 million shares worth more than $68 million.
In its Q3 2021 investor letter, FPA Queens Road, an asset management firm, highlighted a few stocks and South Jersey Industries, Inc. was one of them. Here is what the fund said:
“South Jersey Industries, Inc. shares fell due in part to the cancellation of the PennEast pipeline. The pipeline, which South Jersey Industries, Inc. was to be a partner in, was slated to deliver 1.1 billion cubic feet per day of natural gas from the Marcellus shale region to New Jersey and Pennsylvania. While the regulatory environment in New Jersey has historically been favorable, the state’s role in preventing the PennEast pipeline’s construction is causing us to reassess the regulatory environment there. The company currently pays a 5.5% dividend yield and is expected to continue its long history of slow but steady normalized earnings growth.”
8. NorthWestern Corporation (NASDAQ:NWE)
Number of Hedge Fund Holders: 18
Forward Dividend Yield: 4.04%
NorthWestern Corporation (NASDAQ:NWE) provides electricity and natural gas to residential, commercial, and industrial customers. On March 3, the company announced that it would be committing to a new plan to reach net zero emissions by 2050. Under this plan, the firm plans to utilize new technologies and make additional pipeline infrastructure investments. In 2021, the firm provided nearly 56% of electricity customers with carbon-free services, higher than the industry average of around 40%.
NorthWestern is currently in the midst of a 16-year run of annual dividend growth and boasts one of the highest yields on this list at just over 4%. On April 19, Barclays analyst Eric Beaumont upgraded NorthWestern Corporation stock to ‘Equal Weight’ from ‘Underweight’ and raised the price target on it to $62 from $57, noting the shares reflected a “fairly valued” risk/reward.
NWE was popular among hedge funds towards the end of 2021. At the end of the fourth quarter, 18 hedge funds in the database of Insider Monkey held stakes worth $106 million in NorthWestern Corporation, up from 14 in the previous quarter with holdings worth $37 million.
7. Portland General Electric Company (NYSE:POR)
Number of Hedge Fund Holders: 22
Forward Dividend Yield: 3.24%
Portland General Electric Company (NYSE:POR) is an integrated electric utility company. The company has a solid track record in the dividend space. It has paid a dividend to shareholders consistently for the past 15 years. These payouts have also grown annually over the period. On April 22, the firm declared a quarterly dividend of $0.45 per share, in line with previous. The firm also beat market expectations on revenue for the 2021 fiscal year by $90 million, growing revenue by more than 11% compared to 2020.
On April 19, Wells Fargo analyst Sarah Akers maintained an ‘Equal Weight’ rating on Portland General Electric Company stock and raised the price target on it to $58 from $53, underlining higher peer group multiples in the ratings update.
At the end of the fourth quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $80.6 million in Portland General Electric Company, up from 15 in the previous quarter holdings stakes worth $80.2 million.
In its Q3 2021 investor letter, Miller Howard Investments, an asset management firm, highlighted a few stocks and Portland General Electric Company was one of them. Here is what the fund said:
“Other stocks providing balance against our cyclicals include Portland General Electric Company. They pay good dividends supported by stable business models and have a conservative amount of debt. The dividend yield on our Income-Equity Strategy is now 3.6%. The No-MLP version yield is 3.5%. Both yields are roughly 2.5 times the yield on the S&P 500 Index, and we are seeing dividend increases across our portfolios. Our income advantage over the broad market is significant, yet we also believe that we have enough cyclical tilt to perform well in a recovery. We continue to monitor a variety of risks, with inflation and COVID-19 trends being most important.”
6. MDU Resources Group, Inc. (NYSE:MDU)
Number of Hedge Fund Holders: 22
Forward Dividend Yield: 3.16%
MDU Resources Group, Inc. (NYSE:MDU) engages in the energy delivery business. The company recently completed an expansion to its North Dakota gas pipeline. The pipeline has the capacity to transport 250 million cf/day of natural gas from the Bakken production area in the region. This capacity can be increased to 625M cf/day. WBI Energy, the subsidiary of MDU Resources that is taking lead on the project, has now boosted pipeline system capacity to 2.4 billion cf/day of natural gas.
In November last year, MDU Resources Group, Inc. unveiled a plan to spend nearly $3 billion in capital on infrastructure development and grid reliability and resiliency over the next five years. The firm expects to grow its rate base by 5% annually over the next five years.
Among the hedge funds tracked by Insider Monkey’s database, Connecticut-based firm AQR Capital Management is a leading shareholder in MDU Resources Group, Inc. with 1.8 million shares worth more than $56 million.
In addition to Duke Energy Corporation, Consolidated Edison, Inc., and American Electric Power Company, Inc., MDU Resources Group, Inc. is one of the utility stocks on the radar of institutional investors.
5. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 22
Forward Dividend Yield: 3.22%
Consolidated Edison, Inc. has stakes in the electric, gas, and steam delivery businesses. The company has one of the most solid track records in the dividend space. For the past 47 years, it has paid a growing payout to shareholders. The industry median in this regard is just seven years. Continuing on this impressive trajectory, the company declared a quarterly dividend of $0.79 per share on April 21, in line with previous. The payout will be dispatched to shareholders of note by late May.
On March 10, Mizuho analyst Anthony Crowdell kept a ‘Buy’ rating on Consolidated Edison, Inc. and raised his price target on it to $94 from $90, noting that a sale of its clean energy business would help the firm minimize equity needs in the coming years.
At the end of the fourth quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $323 million in Consolidated Edison, Inc., compared to 24 funds long ED in the preceding quarter with positions valued at $364 million.
4. Pinnacle West Capital Corporation (NYSE:PNW)
Number of Hedge Fund Holders: 30
Forward Dividend Yield: 4.40%
Pinnacle West Capital Corporation (NYSE:PNW) provides retail and wholesale electric services. On February 25, the firm posted its results for the fourth quarter of 2021, reporting earnings per share of $0.24, beating estimates by $0.21. Revenue over the period was $798 million, up nearly 8% year-on-year and beating expectations by $139 million. In its guidance for the 2022 fiscal year, the firm said it expects consolidated earnings to be around $4.10 per share against consensus estimates of $3.96 per share.
Pinnacle West has a 28-year run of making dividend payments and a ten-year streak of annual dividend increases. On April 4, RBC Capital analyst Shelby Tucker maintained a ‘Sector Perform’ rating on Pinnacle West Capital Corporation and raised the firm’s price target on it to $80 from $76, noting that the fundamental setup for the firm in Arizona remained attractive with strong customer growth.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Pinnacle West Capital Corporation with 707,064 shares worth more than $49 million.
3. UGI Corporation (NYSE:UGI)
Number of Hedge Fund Holders: 31
Forward Dividend Yield: 3.77%
UGI Corporation (NYSE:UGI) markets energy-related products and services. In early January, the company announced that it agreed to purchase the Stonehenge Appalachia midstream natural gas gathering system from Stonehenge Energy Holdings in a deal worth $190 million. The system includes 47 miles of pipeline and associated compression assets and has a capacity of 130M cf/day. The firm expects stable revenue from the system that is already under a long-term contract.
UGI has raised its annual dividend payouts for 18 consecutive years. On March 22, Barclays analyst Christine Cho maintained an ‘Equal Weight’ rating on UGI Corporation with a price target of $40, noting that tail risks in energy marketing could sustain for the near-term.
Among the hedge funds tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in UGI Corporation with 8.6 million shares worth more than $396 million.
2. Dominion Energy, Inc. (NYSE:D)
Number of Hedge Fund Holders: 34
Forward Dividend Yield: 3.07%
Dominion Energy, Inc. (NYSE:D) produces and distributes energy. The firm recently obtained the approval of state and federal authorities for the expansion of new solar and energy storage projects in Virginia. The expansion is part of the company’s long-term plan to reduce its greenhouse gas emissions while meeting the energy needs of the customers. The expansion plan includes 15 projects in the region that will provide 1,000 MW of carbon-free electricity. That power will meet the needs of over 250,000 homes in Virginia.
Dominion was forced to slash its dividend by 33% in late 2020, but raised it slightly earlier this year. In late January, Barclays analyst Eric Beaumont reinstated coverage of Dominion Energy, Inc. stock with an ‘Equal Weight’ rating and a price target of $86, noting that the firm had “exceptional visibility” in long-term capital deployment opportunities.
Among the hedge funds tracked by Insider Monkey’s database, Ohio-based investment firm Diamond Hill Capital is a leading shareholder in Dominion Energy, Inc. with 3.6 million shares worth more than $284 million.
1. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 36
Forward Dividend Yield: 3.44%
Duke Energy Corporation is a North Carolina-based energy company. New filings from the company show that it has entered into an amended credit agreement that has boosted the credit line of the firm to $9 billion from $8 billion. The termination date of the agreement has also been expanded from March 2025 to March 2027. As of mid-March, the firm had nearly $6.35 billion available for borrowing under the agreement. The company has an impressive dividend history with 11 consecutive years of growing payouts.
On April 7, KeyBanc analyst Sophie Karp kept an ‘Overweight’ rating on Duke Energy Corporation and raised her price target on it to $119 from $110, noting the firm was “well positioned” as a core utility investment.
At the end of the fourth quarter of 2021, 36 hedge funds tracked by the database of Insider Monkey held stakes worth $1.1 billion in Duke Energy Corporation, up from 32 funds in the preceding quarter with $687 million in holdings.
For more intriguing dividend stock picks, check out 10 Russell 2000 Basic Materials Dividend Stocks to Buy and 10 Utilities Stocks with Over 3% Dividend Yield.
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This article is originally published at Insider Monkey.
