In this article, we discuss the top 12 electricity utility dividend stocks to buy.
Inflation is cutting deep into the pockets of everyday citizens across the globe. In the United States, the consumer price index (CPI), a benchmark for inflation, rose 8.3% year-on-year in April. This was near the highest levels in over 40 years, and above the estimated figure of 8.1%. The Core CPI, which measures living prices excluding energy and food, also rose at a higher than expected rate of 6.2%.
A large contributor towards spiraling consumer prices is the bump in valuations of oil and natural gas. Gasoline prices in the United States have more than doubled since 2020, and the average price for regular gasoline stands at a historic high of $4.42 per gallon.
Utility stocks are defensive plays which offer a safe haven in volatile market situations. This is because demand for utility services never dampens even in times of deep recession, and if allowed by regulators, these firms can pass on the increase in cost to their consumers. Not only that, most of these firms also offer dividend payments to shareholders, which makes holding these stocks all the more comfortable and rewarding.
In these testing times, investors are naturally weary of investing in a climate where their money rapidly loses value. Therefore, many are pouring their money into risk-free, solid businesses such as Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and Alphabet Inc. (NASDAQ:GOOG). But in this article we’ll be focusing on the best electric utility dividend stocks to buy.
Photo by Matthew Henry on Unsplash
Our Methodology
We picked electric utility dividend stocks with healthy yields, positive analyst ratings, growth catalysts and solid business fundamentals. Hedge fund sentiment around each stock has been derived from Insider Monkey’s database of 900+ elite hedge funds tracked at the end of the fourth quarter of 2021.
Top 12 Electric Utility Dividend Stocks To Buy
12. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 22
Dividend Yield (as of May 12): 3.37%
Consolidated Edison, Inc. (NYSE:ED) ranks next on our list of the top 12 electric utility dividend stocks to buy now. The New York-based firm provides natural gas, electricity and steam to millions of customers in the New York City and Westchester County area. It is one of the most prominent dividend-payers in the electric utility sector, having grown its dividend payments for 47 years in a row. On April 21, Consolidated Edison, Inc. declared a $0.79 per share quarterly dividend, in-line with previous. The company’s yield stands at 3.37% as of May 12.
On April 25, Credit Suisse analyst Nicholas Campanella initiated coverage of Consolidated Edison, Inc. with a ‘Neutral’ rating and a $100 price target, noting that the stock is fairly valued at current levels. As of May 12, shares of Consolidated Edison, Inc. have gained 20.47% in the last 12 months, and 10.24% in the year to date.
For the first quarter of 2022, Consolidated Edison, Inc. posted revenue of $4.06 billion, beating estimates by $354.6 million. This also showed an increase of 10.42% from the year-ago quarter.
Out of all the hedge funds tracked by Insider Monkey at the end of the fourth quarter of 2021, 22 hedge funds were long Consolidated Edison, Inc. with combined stakes worth roughly $323 million. Electron Capital Partners was the largest shareholder of the firm at the end of December, with 1.27 million shares worth $108.8 million.
Just like Johnson & Johnson, Walmart Inc., and Alphabet Inc., Consolidated Edison, Inc. is an exciting stock to buy now.
11. Alliant Energy Corporation (NASDAQ:LNT)
Number of Hedge Fund Holders: 22
Dividend Yield (as of May 12): 2.95%
Alliant Energy Corporation (NASDAQ:LNT) is a utility holding company based in Wisconsin which provides regulated electricity and natural gas services to millions of customers across Iowa, Minnesota and Wisconsin. As of May 12, the firm offers a dividend yield of 2.95%, and has a solid dividend growth record of 18 years in a row. Alliant Energy Corporation on April 14 declared $0.4275 per share quarterly dividend, which was in-line with previous.
On May 2, Wolfe Research analyst Steve Fleishman maintained an ‘Outperform’ rating on Alliant Energy Corporation shares, and revised the price target to $65 from $67, noting that the firm beat Q1 expectations and reaffirmed 2022 guidance.
For the first quarter 0f 2022, Alliant Energy Corporation posted an EPS of $0.77, beating estimates by $0.05. The company raked in $1.07 billion in revenue for the quarter, outperforming analysts’ estimates by $94.9 million and showing an increase of 18.53% year-on-year.
Hedge fund sentiment was positive on Alliant Energy Corporation at the close of the fourth quarter of 2021, where 22 hedge funds reported bullish bets on the company shares. The aggregate worth of these holdings stood at $146.7 million. In comparison, 17 hedge funds held $76.7 million worth of positions in the firm a quarter ago. Citadel Investment Group significantly increased its stake in Alliant Energy Corporation during the fourth quarter of 2021, with roughly 808,000 shares valued at $49.6 million, making it the firm’s biggest shareholder.
10. Eversource Energy (NYSE:ES)
Number of Hedge Fund Holders: 24
Dividend Yield (as of May 12): 2.88%
Then there’s Eversource Energy (NYSE:ES), a Massachusetts-based firm which deals in the transmission of electricity, natural gas and water to residential, commercial and industrial customers as well as fire departments. It was formerly known as Northeast Utilities and changed its name to Eversource Energy in 2015. The firm’s operations are centered around the states of Connecticut, New Hampshire and Massachusetts.
Eversource Energy on May 4 declared $0.6375 per share quarterly dividend, in-line with previous. This brings the firm’s dividend yield to 2.88% as of May 12. The firm has grown its dividend yield for 22 years in a row.
Wells Fargo analyst Neil Kalton in early May raised the firm’s price target on Eversource Energy to $97 from $92 and maintained an ‘Overweight’ rating on the company shares. The analyst is positive on the company’s decision to announce a strategic review of the its offshore wind operations. Under this review, the company could potentially sell off the entirety or some part of its 50% stake in its offshore wind energy joint venture with Orsted.
24 out of the 900+ elite hedge funds tracked by Insider Monkey were bullish on Eversource Energy shares at the end of the fourth quarter with aggregate positions worth $140 million. This shows a positive trend from the previous quarter where 21 hedge funds held positions in the company worth $137 million. GLG Partners held roughly 324,000 shares of Eversource Energy worth $29.5 million at the end of Q4 2021, which made it the largest shareholder of the firm.
9. Edison International (NYSE:EIX)
Number of Hedge Fund Holders: 25
Dividend Yield (as of May 12): 4.19%
Edison International (NYSE: EIX) is a utility firm which provides electricity to more than 15 million residential, commercial and industrial customers across California. The firm generates almost half of its electricity from green energy sources. It was founded in 1886, and has grown its dividend payments to investors for 18 years in a row. As of May 12, the firm has grown 17.36% in the last 12 months, and 3.78% in the last 6 months.
On February 24, Edison International declared $0.70 per share quarterly dividend, which was in-line with previous. This brings the company’s yield to 4.19% as of May 12.
On May 4, Citi analyst Ryan Levine maintained a ‘Buy’ rating on Edison International shares, and increased the price target to $79 from $67. The analyst is bullish on the company shares as he sees an end in sight to its wildfire liability, given it turns the corner from a challenging wildfire season in California.
As of the end of the fourth quarter of 2021, 25 hedge funds held $1.33 billion worth of positions in Edison International. The same number of hedge funds were long on the company shares a quarter ago as well. Pzena Investment Management held a $1.01 billion stake in the utility firm at the close of the fourth quarter, making it the firm’s leading shareholder.
Investment firm ClearBridge Investments talked about Edison International in its Q4 2021 investor letter. The fund said:
“Defensive sectors such as utilities underperformed the broader market, with our California-based utilities, Edison International, generating modestly below-sector returns on continuing wildfire concerns, despite significantly improved financial exposure due to the 2019 legislation AB 1054. The legislation was a major positive step toward reducing wildfire risk to California public utilities, which we expect to be reflected in improved valuations over time.”
8. CMS Energy Corporation (NYSE:CMS)
Number of Hedge Fund Holders: 25
Dividend Yield (as of May 12): 2.69%
CMS Energy Corporation (NYSE:CMS) offers a dividend yield of 2.69% as of May 9, and ranks next on our list of the best electric utility dividend stocks to buy now. The company deals in the production and transmission of electricity and gas to millions of customers in the state of Michigan. On April 22, CMS Energy Corporation posted $0.46 per share quarterly dividend, which was in-line with previous. The firm has grown its dividend payments to shareholders for 15 years in a row.
On April 25, CMS Energy Corporation was given a ‘Neutral’ rating and a $76 price target by Credit Suisse analyst Nicholas Campanella. He sees the firm as a “quality name in the space” which boasts a solid track record of meeting and/or beating expectations. On April 20, the firm reached an agreement with stakeholders throughout Michigan to go coal-free in its energy production by 2025, making it among the first firms in the US to do so.
Of all the hedge funds tracked by Insider Monkey at the close of Q4 2021, 25 were long CMS Energy Corporation with combined stakes worth more than $361 million. The same number of hedge funds were bullish on the company shares a quarter ago as well. Zimmer Partners held 2.69 million shares of CMS Energy Corporation worth approximately $175 million, making it the largest shareholder of the firm at the end of the fourth quarter.
7. DTE Energy Company (NYSE:DTE)
Number of Hedge Fund Holders: 27
Dividend Yield (as of May 12): 2.72%
DTE Energy Company (NYSE:DTE) is a Michigan-based energy firm which provides electricity and natural gas to millions to commercial, residential and industrial customers in southeastern Michigan. It also deals in wastewater treatment services, chilled water production, and metallurgical coke. As of May 12, shares of the firm have gained 15.78% in the last 6 months, and 8.77% in the year to date.
Citi analyst Ryan Levine on May 3 raised the firm’s price target on DTE Energy Company to $146 from $134 and reiterated a ‘Buy’ rating on the company shares. The analyst noted that the firm posted a strong quarter owing to outperformance in energy trading. The company is investing more than $1 billion per year towards improving electric reliability and increasing grid capacity for growing adoption of electric vehicles. DTE Energy Company recently partnered with Lyft (NASDAQ:LYFT) to incentivize drivers in its electric service territory who purchase or lease an electric vehicle for use on the Lyft network.
As of the first quarter of 2022, DTE Energy Company posted an EPS of $2.31, beating estimates by $0.23. Revenue for the quarter stood at $4.58 billion, increasing 21.15% year-on-year and beating analysts’ forecasts by $1.04 billion.
Investors were seen piling into DTE Energy Company at the close of the fourth quarter, where 27 hedge funds held positions in the firm worth roughly $779 million. In contrast, 22 hedge funds held $426 million worth of stakes in the company a quarter earlier. With a stake worth roughly $136 million, Zimmer Partners was the largest shareholder of DTE Energy Company at the end of December.
6. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 31
Dividend Yield (as of May 12): 2.90%
Sempra (NYSE:SRE) is a California-based electric energy holding company which ranks next on our list of the top electric utility dividend stocks to buy. It operates through its segments; San Diego Gas & Electric Company, Southern California Gas Company, and Sempra Texas Utilities. As of May 12, Sempra offers a dividend yield of 2.9%, and has soared 16.65% in the last 12 months, and 29.16% in the last 6 months.
Credit Suisse analyst Nicholas Campanella on April 25 initiated coverage of Sempra with an ‘Outperform’ rating and $180 price target. The analyst holds that utility firms which can best manage inflationary impacts will outperform peers in the current environment, and Sempra is set to benefit owing to its 70% interest in SIP, which offers potential upside from LNG (liquified natural gas) contracting,
Reporting its first quarter earnings on May 5, Sempra disclosed earnings per share of $2.91, beating estimates by $0.11. Revenue of $3.82 billion for the quarter was above analysts’ expectations by $408.3 million and signaled a jump of 17.2% year-on-year.
Out of all the hedge funds tracked by Insider Monkey, 31 held stakes in Sempra at the close of the fourth quarter. This shows growing investor confidence over the previous quarter where 23 hedge funds reported owning positions in the firm. Zimmer Partners held 1.61 million shares of Sempra worth $214 million, making it the largest shareholder of the firm at the end of December.
Investment firm ClearBridge Investments talked about many stocks in its Q1 2022 investor letter and Sempra was one of them. 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 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.”
In addition to Johnson & Johnson, Walmart Inc., and Alphabet Inc., Sempra is attracting the attention of investors on Wall Street.
5. Dominion Energy, Inc. (NYSE:D)
Number of Hedge Fund Holders: 34
Dividend Yield (as of May 12): 3.23%
Dominion Energy, Inc. (NYSE:D) provides electricity and natural gas to more than 7 million customers across 16 states in the US. It was founded in 1983, and currently boasts 30 gigawatt of electricity generating capacity along with 10,700 miles of electric transmission and 78,000 miles of electric distribution lines.
On May 11, Dominion Energy, Inc. declared $0.6675 per share quarterly dividend, which was in-line with previous. The company’s dividend yield stands at 3.23% as of May 12.
On January 5, UBS analyst Ross Fowler upgraded Dominion Energy, Inc. to ‘Buy’ from ‘Neutral’ and increased the price target to $98 from $81. Fowler noted that the firm’s ESG sponsorship appeal will enhance in 2022 as investors look to support companies making the shift towards clean energy. In February, the firm broadened its Net Zero commitments as one of the country’s leading clean-energy companies. Apart from achieving Net Zero carbon and methane emissions from power generation and natural gas operations by 2050, the company will now work to achieve Net Zero for emissions outside of the company’s direct operations, such as emissions by its customers and suppliers.
Investors were seen piling into Dominion Energy, Inc. at the end of Q4 2021, with 34 hedge funds reporting bullish bets on the company shares, as opposed to 27 hedge funds in the preceding quarter. Ric Dillon’s Diamond Hill Capital was the largest shareholder of Dominion Energy, Inc. at the close of the fourth quarter, with a stake consisting of 3.62 million shares valued at $284.4 million.
4. American Electric Power Company, Inc. (NYSE:AEP)
Number of Hedge Fund Holders: 34
Dividend Yield (as of May 12): 3.18%
American Electric Power Company, Inc. (NYSE:AEP) is an Ohio-based electric utility firm founded in 1906, serving approximately 5.5 million customers across 11 states. It has made sizeable investments towards clean energy, and expects the inauguration of a number of renewable energy facilities within the next two years. It offers shareholders a dividend yield of 3.18% as of May 12, and boasts 17 consecutive years of dividend growth.
On April 25, Credit Suisse analyst Nicholas Campanella initiated coverage of American Electric Power Company, Inc. with an ‘Outperform’ rating and a price target of $113. The analyst contends that investors should focus on the firm’s strategic pivot of divesting under-earning, low multiple assets.
For the first quarter of 2022, American Electric Power Company, Inc. posted an EPS of $1.22, outperforming estimates by $0.02. Revenue of $4.6 billion was also above estimates by roughly $200 million, and grew 7.3% year-on-year.
Renaissance Technologies was the largest shareholder of American Electric Power Company, Inc. at the end of the fourth quarter with a $148 million stake. In total, 34 hedge funds were long on the company shares, with a combined worth of approximately $827 million.
Investment firm ClearBridge Investments talked American Electric Power Company, Inc. 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.”
3. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 36
Dividend Yield (as of May 12): 3.65%
Up next is Duke Energy Corporation (NYSE:DUK), an energy firm based in North Carolina which distributes electricity generated from coal, natural gas, hydroelectric, nuclear fuel and renewable generation such as wind and solar to millions of customers in the states of North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky. It also provides natural gas transmission and storage services.
On April 25, Credit Suisse analyst Nicholas Campanella initiated coverage of Duke Energy Corporation with an ‘Outperform’ rating and a $125 price target. The analyst sees the firm well-positioned on the two core themes of decarbonization rate-of-change and inflation, and sees its size and diverse geographical footprint benefiting it as compared to peers.
Investors were seen snapping up on Duke Energy Corporation shares at the end of the fourth quarter, with 36 hedge funds reporting bullish bets on the company shares. This is in comparison to 32 hedge funds a quarter ago. Jim Simons’ Renaissance Technologies held 1.74 million shares of the firm valued at $183.2 million, making it the largest shareholder of the firm at the close of Q4 2021.
Duke Energy Corporation’s (NYSE:DUK) revenue for Q1 2022 stood at $7.13 billion, up 15.97% from the year-ago quarter and beating estimates by roughly $808 million. EPS was recorded at $1.30, falling slightly below estimates by $0.03.
2. FirstEnergy Corp. (NYSE:FE)
Number of Hedge Fund Holders: 40
Dividend Yield (as of May 12): 3.72%
FirstEnergy Corp. (NYSE:FE) is an Ohio-based electric utility firm which serves approximately 6 million customers in the states of Pennsylvania, Maryland, West Virginia, New Jersey, New York and Ohio. It generates electricity using coal-fired plants, nuclear reactors, natural gas, wind and solar power generating facilities. As of May 12, FirstEnergy Corp. has grown 14.93% in the last 12 months, and 7.31% in the last 6 months.
FirstEnergy Corp. on May 4 declared $0.39 per share quarterly dividend, in line with previous. This brings the company’s dividend yield to 3.72% as of May 12.
Credit Suisse analyst Nicholas Campanella on April 25 initiated coverage of FirstEnergy Corp. with an ‘Outperform’ rating and price target of $51. The analyst sees the company better positioned than before to address core regulated growth with limited equity issuances, and sees upside potential to its current valuation.
40 hedge funds held positions in FirstEnergy Corp. at the end of the fourth quarter of 2021, with a combined value of $1.75 billion. This shows a positive trend from the previous quarter where 38 hedge funds held $1.47 billion worth of stakes in the firm. The most prominent shareholder of FirstEnergy Corp. at the close of the fourth quarter was Icahn Capital LP, with approximately 19 million shares valued at $788.9 million.
Here is what ClearBridge Investments had to say about FirstEnergy Corp. in its Q4 2021 investor letter:
“On a regional level, the Strategy’s largest exposure is in the U.S. and Canada (44%), consisting of regulated and contracted utilities (31%) and economically sensitive user-pays infrastructure (13%).
During the quarter we initiated new positions in U.S. electric utility FirstEnergy. With supply chain issues, higher housing costs, higher commodity prices and producer price inflation remaining square in the sights for 2022, we think higher inflation is a risk for global markets. We expect growth to slow to trend or below by mid-2022 and U.S.”
1. CenterPoint Energy, Inc. (NYSE:CNP)
Number of Hedge Fund Holders: 25
Dividend Yield (as of May 12): 2.28%
Then there’s CenterPoint Energy, Inc. (NYSE:CNP), a Houston-based energy firm which provides electricity and natural gas to customers across the United States. On April 22, CenterPoint Energy, Inc. declared $0.17 per share quarterly dividend, which was in-line with previous.
Credit Suisse analyst Nicholas Campanella in late April initiated coverage of CenterPoint Energy, Inc. with an ‘Outperform’ rating and a price target of $34. The analyst thinks the firm has been realizing the benefits of a wider restructuring, and can still benefit from multiple expansion. Mizuho analyst Anthony Crowdell gave CenterPoint Energy, Inc. a ‘Buy’ rating on April 5, viewing the stock as a top idea whilst noting that its 8% annual earnings growth is one of the highest in the industry.
Investor confidence in the energy firm soared over the fourth quarter, where 25 hedge funds reported bullish bets on CenterPoint Energy, Inc. shares. In comparison, 14 hedge funds held positions in the firm a quarter ago. Point72 Asset Management initiated a position in the firm at the close of the fourth quarter and established itself as a leading shareholder, with 1.78 million shares valued at $49.8 million.
Miller Howard Investments mentioned CenterPoint Energy, Inc. in its Q3 2021 investor letter. The fund 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.”
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