11 Best Electric Utility Stocks To Buy Right Now
In this article, we discuss 11 best electric utility stocks to buy now. If you want to skip our discussion on the electric utility industry, head directly to 5 Best Electric Utility Stocks To Buy Right Now.
In the face of a continuously changing energy landscape, US utilities maintain three primary objectives according to Ernst & Young (EY) – ensuring reliable, affordable, and sustainable energy. The utilities sector in 2024 requires a careful balance between conventional and innovative funding approaches to advance these priorities. Presently, utility executives are better equipped than ever to decisively navigate the transformative decisions required for the future. Initial focus should be on three primary opportunities – (1) Strengthening the balance sheet to support investment strategies that generate enduring value for stakeholders, (2) Optimizing newly accessible capital, such as grants and tax credits, to expedite the energy transition for power and utility companies, and (3) Upgrading technology to advance business operations.
In 2023, the US power and utilities industry experienced advancements in decarbonization, increased deployment of solar power and energy storage, and improved grid reliability. As per a recent Deloitte report, the sector faced mixed fundamentals, with a slight decrease in electricity sales due to mild weather. Wholesale electricity prices dropped in response to lower natural gas costs, but high capital expenditures for grid modernization and decarbonization, coupled with rising interest rates, contributed to potential customer bill increases. The industry also grappled with costs related to disaster recovery, cybersecurity, and climate-related challenges. Despite lower fuel costs, retail electricity prices were projected to increase by 1.9% year-over-year, with residential prices potentially rising by 4.7%. In 2024, electricity prices are expected to stabilize, with a forecasted 2% increase in sales. The industry may focus on electrification, resource adequacy, and addressing rising costs, exploring the potential use of AI, including generative AI, to tackle challenges.
In 2023, utilities faced a decline as investor preference shifted from defensive stocks to mega-cap growth companies, particularly in the technology and communication services sectors. This led to utilities being one of the weakest-performing sectors in the S&P 500. However, by late 2023, utilities stocks experienced significantly lower valuations, trading at one of the largest discounts to the S&P in the past two decades, according to a Fidelity report. The utility sector's near-term performance may continue to be influenced by investor sentiment and economic conditions in 2024. If the economy maintains a soft landing with strong growth and low inflation, utilities may remain out of favor. Conversely, in the face of economic weakness, investors could turn back to defensive stocks like utilities, known for stability, durable cash flows, and dividends, especially during market volatility. A decline in interest rates could further benefit utility stocks by making their dividends more attractive compared to bonds.
Looking at the longer term, utilities are positioned at the center of the shift from carbon-based fuels to renewable energy sources. The Inflation Reduction Act of 2022 is expected to accelerate this transition by providing incentives for the adoption of clean-energy options and reducing greenhouse gasses. Consumers, businesses, and governments are actively working to decrease their carbon footprints, and forecasts suggest a potential doubling of the portion of US power generation from renewable sources by 2030.
Some of the best electric utility stocks to invest in include NextEra Energy, Inc. (NYSE:NEE), PG&E Corporation (NYSE:PCG), and The Southern Company (NYSE:SO).
Our Methodology
We chose the top electric utility stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the third quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
A vibrant skyline illuminated by the lights of the electric utility company.
Best Electric Utility Stocks To Buy Right Now
11. Edison International (NYSE:EIX)
Number of Hedge Fund Holders: 28
Edison International (NYSE:EIX) is involved in the generation and distribution of electric power. The company serves residential, commercial, industrial, public, and agricultural customers in California. Additionally, Edison International offers decarbonization and energy solutions to commercial, institutional, and industrial customers in North America and Europe. On December 31, Edison International (NYSE:EIX) declared a $0.78 per share quarterly dividend, a 5.8% increase from its prior dividend of $0.74. The dividend was distributed to shareholders on January 31.
According to Insider Monkey’s fourth quarter database, 28 hedge funds were bullish on Edison International (NYSE:EIX), same as the prior quarter. Richard S. Pzena’s Pzena Investment Management is the leading stakeholder of the company, with 13.3 million shares worth $950.7 million.
Like NextEra Energy, Inc. (NYSE:NEE), PG&E Corporation (NYSE:PCG), and The Southern Company (NYSE:SO), Edison International (NYSE:EIX) is one of the best utility stocks to invest in.
ClearBridge Large Cap Value Strategy made the following comment about Edison International (NYSE:EIX) in its Q3 2023 investor letter:
“Our two utilities Sempra and Edison International (NYSE:EIX) were also negatively impacted by rising rates, although both outperformed the utility benchmark. We maintain a large active overweight to Sempra and added opportunistically to Edison to reflect its strong fundamentals.”
10. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 28
Consolidated Edison, Inc. (NYSE:ED) specializes in regulated electric, gas, and steam delivery services in the United States. The company operates infrastructure, including transmission lines, substations, transformers, overhead and underground distribution lines, as well as natural gas distribution mains and service lines. It is one of the best utility stocks to buy. On February 15, Consolidated Edison, Inc. (NYSE:ED) reported a Q4 non-GAAP EPS of $1.00, beating market estimates by $0.03. The company also declared a $0.83 per share quarterly dividend on January 18, which will be paid on March 15 to shareholders on record as of February 14.
According to Insider Monkey’s fourth quarter database, 28 hedge funds were bullish on Consolidated Edison, Inc. (NYSE:ED), compared to 27 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 879,923 shares worth $80 million.
9. Eversource Energy (NYSE:ES)
Number of Hedge Fund Holders: 29
Eversource Energy (NYSE:ES) is a public utility holding company engaged in the energy delivery business. The company operates through segments such as Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution. Eversource Energy (NYSE:ES) is one of the best utility stocks to invest in.
On February 13, Eversource Energy (NYSE:ES) announced its agreement to divest its 50% ownership in the South Fork Wind and Revolution Wind projects, located off the northeastern US coast, to Global Infrastructure Partners for approximately $1.1 billion in cash. This move brings Eversource Energy a step closer to achieving its objective of withdrawing from the challenged wind power sector.
According to Insider Monkey’s fourth quarter database, 29 hedge funds were long Eversource Energy (NYSE:ES), compared to 30 funds in the preceding quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is the largest stakeholder of the company, with 939,334 shares worth $58 million.
8. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 30
Duke Energy Corporation (NYSE:DUK) operates as an energy company in the United States. The company has two segments – Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I). On January 11, Duke Energy Corporation (NYSE:DUK) declared a quarterly dividend of $1.025 per share, in line with previous. The dividend is payable on March 18, to shareholders of record on February 16. It is one of the best utility stocks to watch.
According to Insider Monkey’s fourth quarter database, 30 hedge funds were bullish on Duke Energy Corporation (NYSE:DUK), compared to 39 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a significant position holder in the company, with 733,100 shares worth over $71 million.
7. WEC Energy Group, Inc. (NYSE:WEC)
Number of Hedge Fund Holders: 31
WEC Energy Group, Inc. (NYSE:WEC) operates in the regulated natural gas and electricity sectors, providing renewable and non-regulated renewable energy services in the United States. The company operates through six segments – Wisconsin, Illinois, Other States, Electric Transmission, Non-Utility Energy Infrastructure, and Corporate and Other. WEC Energy Group, Inc. (NYSE:WEC) is one of the top utility stocks to invest in. On February 1, WEC Energy Group, Inc. (NYSE:WEC) reported a Q4 non-GAAP EPS of $1.10, beating Wall Street estimates by $0.02. However, the revenue of $2.22 billion fell short of market consensus by $510 million.
According to Insider Monkey’s fourth quarter database, 31 hedge funds were long WEC Energy Group, Inc. (NYSE:WEC), compared to 25 funds in the last quarter. Israel Englander’s Millennium Management is the biggest stakeholder of the company, with 1.8 million shares worth $152.7 million.
Carillon Tower Advisers made the following comment about WEC Energy Group, Inc. (NYSE:WEC) in its Q3 2022 investor letter:
“WEC Energy Group, Inc. (NYSE:WEC), the Wisconsin electric and gas utility, fell in a weak utility group as interest rates rose and fears of bad debt expenses gathered. We view the company’s bad debt risk as relatively modest compared to the industry.”
6. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 32
American Electric Power Company, Inc. (NASDAQ:AEP) is an electric public utility holding company in the United States, engaged in the generation, transmission, and distribution of electricity for both retail and wholesale customers. On January 19, American Electric Power Company, Inc. (NASDAQ:AEP) declared a quarterly dividend of $0.88 per share, in line with previous. The dividend is payable on March 8, to shareholders on record as of February 9.
According to Insider Monkey’s fourth quarter database, 32 hedge funds held stakes in American Electric Power Company, Inc. (NASDAQ:AEP), compared to 39 funds in the last quarter. Eric W. Mandelblatt’s Soroban Capital Partners is a prominent stakeholder of the company, with approximately 2 million shares worth $159.5 million.
In addition to NextEra Energy, Inc. (NYSE:NEE), PG&E Corporation (NYSE:PCG), and The Southern Company (NYSE:SO), American Electric Power Company, Inc. (NASDAQ:AEP) is one of the best utility stocks to monitor. It ranks 6th on our list.
Here is what ClearBridge Investments Value Equity has to say about American Electric Power Company, Inc. (NASDAQ:AEP) in its Q1 2022 investor letter:
“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.”
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Disclosure: None. 11 Best Electric Utility Stocks To Buy Right Now is originally published on Insider Monkey.