[Editor’s note: “7 Utility Stocks to Buy That Offer Juicy Dividends” was previously published in February 2020. It has since been updated to include the most relevant information available.]
When growth is going, people look askance at utilities.
They’re boring. They aren’t big growers. They’re reliable.
I remember when the dot-com boom was near its height; there were plenty of brokers and financial talking heads saying growth was the new income. They told investors to ditch their boring utilities and total return stocks and get into the growth names.
We see how that turned out.
Having rock-solid companies underpin your portfolio may not be sexy, but it is practical and profitable. And it’s especially valuable in markets like this one.
Even though I run a newsletter called Growth Investor, I’ll be the first to tell you that long-term investing success is all about balance. While growth stocks may be more fun, having some surefire security names also will feel good in the long-term. And even in the short-term, it will feel good if things get dicey.
These seven utility stocks with juicy dividends fit that bill, and they all are Portfolio Grader “buy” rated.
Utility Stocks to Buy: Dominion Energy (D)
Dividend Yield: 5.15%
Dominion Energy (NYSE:D) is a diversified utility that operates its primary electric utility business in Virginia and in some parts of the Carolinas.
That means it encompasses the Washington, D.C. metropolitan area including the Pentagon as well as a key point of the internet’s backbone. It also includes the Tidewater area where one of the U.S. Navy’s biggest ports is and one of the world’s largest shipyards. It has 7.5 million customers
It has a very good relationship with state regulators and has a reliable, regulated business.
Its growth kicker is its unregulated business. That’s where can sell its energy and natural resources (like natural gas) on the free market to states and industries. Dominion is a big player in natural gas. And it has a natural gas terminal in Maryland where it’s preparing to export liquefied natural gas (LNG) abroad where prices are much higher.
It is also moving aggressively into renewables that it can then sell to other utilities or wholesale customers for tax credits.
The stock delivers a rich and reliable 5.15% dividend.
NextEra Energy Partners (NEP)
Dividend Yield: 2.4%
Basically, NEE uses NEP to run its renewable energy business. And it’s going pretty well, since NEE is the world’s largest producer of wind and solar energy. That means NEP is the division that’s getting it done.
Renewables are in very big demand now, and not just because they’re a feel-good choice. Given some of the challenges with fossil fuels, renewables in their current state are more reliable options and can be cheaper than fossil fuels. And it looks like that trend will continue.
Since this is the unregulated side of the business, NEP sells its energy all over the country, as well as to its parent company.
The limited partnership status means it pays its net revenue to shareholders in the form of a dividend, which now sits at 2.4%. The stock is up 22% in the past year. So, while I certainly believe in owning Elite Dividend Payers (and have an entire set of recommendations with the name), at Growth Investor, NextEra’s investor shares are actually one of our High-Growth Investments.
Duke Energy (DUK)
Dividend Yield: 4.7%
Its regulated service area is the Carolinas, but it has unregulated operations across the U.S. and in Canada as well.
Duke was one of the pioneers in renewable energy, which had a mixed impact. At the time, pursuing renewables was expensive and didn’t get any support from government regulators.
Most other utilities shied away, and what Duke did build was more for experiment than profit.
But now, it is a leader in the field and is benefiting from its experiences in the sector. Like many Mid-Atlantic and Southern utilities, it also operates nuclear facilities and has a robust natural gas business as well.
The stock offers a rock-solid 4.7% dividend yield.
TerraForm Power (TERP)
Dividend Yield: 5.3%
TerraForm Power (NASDAQ:TERP) is a new-generation energy company. It isn’t a utility, but a power company.
The easiest way to think about TERP is like a modern version of an oil company, but with renewable resources. It has wind and solar farms across the U.S. and Western Europe, and it then sells that power to utilities and industries.
The two compelling arguments for this kind of company now are both financial. First, many companies and utilities need to offset their carbon emissions with clean energy but don’t want to build and operate their own renewable sites.
Second, the price of renewable energy is now competitive with many older fossil fuels. And companies get tax credits for using the electricity generated from wind and solar.
TerraForm doesn’t have a regulated side of its business, which helps in this market.
It sports an impressive 5.3% dividend as well. Just remember it has a $3.4 billion market capitalization, so it’s on the small side when it comes to utilities or utility-heavy businesses.
Southern Company (SO)
Dividend Yield: 4.4%
Southern Company (NYSE:SO) is one of the bluest of all blue-chip electric utilities. Its brethren on the East Coast — Dominion and Duke — are arguably the most solid big utilities in the U.S.
Like the others, Southern is big, diversified and knows how to manage its businesses during any economic cycle. That’s the kind of business model that tends to do well in my stock-picking system. Southern is also the only utility in the country that is actually building a new nuclear reactor.
And even when that project went sideways a couple years back, Southern grabbed the reins and got it back on track, barely missing a beat.
It has 9 million gas and utility customers across six southern states and has power plants in several others. Its $59 billion market cap gives you an idea of its size.
The stock is up 9% in the last year, yet it’s trading at a trailing price-to-earnings ratio of 12.5. It also has a rich and reliable 4.4% dividend yield.
Clearway Energy (CWEN)
Dividend Yield: 4.3%
Clearway Energy (NASDAQ:CWEN) is another 21st century power company that solely focuses on renewable energy resources. It has facilities in 25 states and generates 4.3 gigawatts of power that it sells in the unregulated market across the U.S.
Its operations allow its customers to offset about 9 million tons of carbon dioxide a year in carbon taxes and renewables incentives. It also has a small portfolio of geothermal operations.
CWEN stock is one of the small companies listed here, with about $2.4 billion in market cap. That’s still a decent sized company and it’s in a growth industry, so its growth is crucial to its long-term success at this point.
And that growth seems to be going well. The stock is up 22% in the past year, while still delivering a healthy 4.3% dividend. It’s one of the more aggressive choices, but continues to hit all the right notes.
Dividend Yield: 4%
It currently has regulated operations in Ohio, Pennsylvania, West Virginia, Virginia, Maryland and New Jersey, with 6 million customers. It operates in some of the more far-flung states as a result of acquisitions of local and regional power companies.
In 2018, its power generation subsidiary FirstEnergy Solutions filed for bankruptcy, looking to close some coal-fired plants and its nukes. This has little bearing on parent FirstEnergy and continues to wind its way through the courts for various regulatory reasons.
The company has solid, diversified markets across a number of states, which is helpful. With a $20.9 billion market cap, it’s a solid company.
The stock has a reliable 4% dividend yield. It just goes to show, as any Growth Investor subscriber can tell you, there is no need to choose between growth and income; you can find both.
An AI Company That Is Poised to Outperform
Outside of utilities, there’s one company in particular that I expect to do exceptionally well this year. It’s a growth stock in the artificial intelligence (AI) space and it offers a dividend, so it offers a rare one-two punch of high growth and income, just like the stocks I talked about today.
I call it my AI Master Key.
It is the company that makes the “brain” that all AI software needs to function, spot patterns and interpret data.
I’ll tell you everything you need to know, as well as my buy recommendation, in my special report for Growth Investor, The A.I. Master Key. The stock is currently sitting pretty with about a 45% return on my Growth Investor Buy List, but it still under my buy limit price — so you’ll want to sign up now. That way, you can get in while you can still do so cheaply.
I also recently recommended a new AA-rated Elite Dividend Payers stock. It’s in the insurance industry and has paid a dividend for a whopping 105 consecutive quarters.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.