This market has been on a tear. If, as the old saying goes, bull markets climb a wall of worry, this one has leapt that wall in a single bound.
Now, maybe with all the Federal Reserve support and the trillions of dollars in stimulus approved by Congress this will continue.
But there are also 40 million people out of work and the economy is in a recession that goes far beyond America’s shores.
If you’re an investor looking for opportunity but would also like sleep-at-night safety, or would like to go on holiday without looking at your portfolio every few hours, then utilities are a good place to start.
For many electric utilities, they have both regulated and unregulated operations. That means one part of the operation provides a solid foundation of conservative growth. And the other provides opportunity to sell energy at market prices, offering greater growth.
Here are 7 utility stocks keeping the lights on below
- NextEra Energy (NYSE:NEE)
- Dominion Energy (NYSE:D)
- American Water Works (NYSE:AWK)
- Brookfield Infrastructure Partners (NYSE:BIP)
- Algonquin Power & Utilities (NYSE:AQN)
- Ormat Technologies (NYSE:ORA)
- Atlantica Sustainable Technologies (NYSE:AY)
These are well-established companies with long records of growth and safety. Between that and their traditionally strong dividend yields, that makes high-quality utilities a must-have for my Growth Investor buy list.
Utility Stocks to Buy: NextEra Energy (NEE)
This company is a prime example of what I was talking about in the intro. It operates FPL (Florida Power & Light), which is a regulated utility that serves southern Florida.
And it is also the largest producer of wind and solar energy in the world.
Its regulated business operates in high-growth, densely populated sector of the state, which means solid, reliable returns.
And its unregulated business sells renewable energy across the US to other utilities and industry. They can use the renewable energy to offset their carbon emissions and they don’t have to get into the renewables business. It’s a model that more and more utilities are adopting.
Also, renewables are more resilient as climactic events rise.
The stock is up 26% in the past year and 7% year to date. The latter figure is bullish given the drop in industrial and commercial demand due to COVID-19 lockdowns. NEE has a 2.2% dividend. You can see why this is among my favorite Elite Dividend Payer stocks for my Growth Investor recommendations.
Dominion Energy (D)
Dominion is one of the biggest utilities on the East Coast. It is the main regulated utility in Virginia as well as parts of the Carolinas. Meanwhile, its natural gas business covers the aforementioned as well as West Virginia, Ohio, Pennsylvania, Georgia, Utah and Wyoming.
D has a $72 billion market cap and a rock-solid business in Virginia, where there are significant corporate offices for defense contractors, telecommunications and internet firms. The point being, it has steady strong demand on both the consumer and commercial sides.
Its unregulated business leans on its natural gas operations. It’s one of a handful of companies that has both extensive natural gas distribution assets as well as an export facility.
Exporting natural gas is a huge opportunity, since natural gas prices are triple (or higher) in European and Asian markets. D also has expanding renewable operations in and beyond its core service areas.
The stock is up 12% in the past year, 3% year to date. But it has a generous and rock-solid 4.4% dividend.
American Water Works (AWK)
AWK’s roots go back to 1886 when it was operating as a utility in the US and Canada. And its journey to its current path has been somewhat circuitous but now it operates divisions in more than 46 states and serves 14 million customers.
The story of the water business has changed over the years. It used to be that cities, towns or municipalities ran their own water companies. But over the past 3 decades that became increasingly expensive, since this isn’t a core competency of many municipal governments.
This was the precursor to the rise of water utilities that could operate these water systems for the governments at set rates, like any other utility. The utilities could do this because they could operate at scale and were focused on just one task. This has worked out very well for both AWK and the states it operates in.
AWK also has contracts for military bases, which is a reliable source of income. Given the current challenges of water demand for commercial and consumer operations, AWK is in a growth market with a broad reach.
The stock is up 13% in the past year and 8% year to date. It also has a 1.7% dividend. And I’ve got even better growth-and-income plays where that came from.
Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure Partners is a Canada-based company with properties around the world. Those properties include utilities, transport, energy and data infrastructure businesses. BIP has been operating for 105 years and is still going strong.
However, the company has a diverse portfolio of assets, which means it can take advantage of opportunities in a number of different industries, given their economic cycle.
The company is structured as a limited partnership, which means stockholders are treated a direct owners, and net income is distributed as a generous dividend. That dividend currently sits at 4.6%.
The stock is up 10% in the past year, despite being off nearly 7% year to date.
Algonquin Power & Utilities (AQN)
Canadian firm Alqgonquin Power holds an interesting mix of assets. And while its name might not be familiar to most south of the border, AQN has operations in 12 U.S. states under its subsidiary Liberty Utilities.
Liberty’s operations range from operating sewer companies to gas, water and electric operations in select cities and districts. Many of the properties were acquired from companies looking to spin off smaller operations and those that weren’t matching the larger focus of the company.
AQN can operate these at smaller scales and still remain profitable. That’s the kind of business model I look for in making Growth Investor picks. The company also is very involved in renewable energy efforts in Canada, including hydroelectric projects.
AQN delivers an attractive 4.2% dividend and the stock is up 20% in the past 12 months, and 3% year to date.
Ormat Technologies (ORA)
This unique company started in Israel in the mid-1960s. It developed a proprietary turbine that could convert geothermal or recovered energy (the heat generated by other equipment) into electricity.
By the oil crisis in the ‘70s, the value of self-sufficient, renewable energy resources became a very popular concept.
In the decades that followed, ORA installed geothermal systems in Israel, New Zealand, Iceland, Guatemala, Kenya and the U.S. Today, the company is headquartered in Nevada.
Most renewable energy headlines go to solar or wind these days, but there is a growing demand for geothermal as well. ORA has a solar division as well, plus a technology that can separate oil from oil sands more efficiently than traditional processes.
While it is an energy company, it doesn’t operate as a utility, so its dividend isn’t spectacular, sitting at 0.6%. ORA is up 15% in the past year, and off 5% year to date. But its technology is at the heart of where energy generation, and thus utility consumption, is going.
Atlantica Sustainable Infrastructure (AY)
Atlantica Sustainable is a UK-based firm that owns a diversified portfolio of energy assets around the world.
From solar farms in Spain, the US, South Africa and the Sahara, to wind turbines in Peru to electrical grids in Chile, AY has operations that span a variety of sectors in a range of countries.
Almost all of its contracts are dollar or euro based, which helps stabilize its income stream. And most projects are under contract for the next decade or longer. This allows the company to look for new projects and show that it can sustain the new opportunity costs.
Launched in 2013, the company is relatively new to the game, but its renewables focus certainly makes it a strong play on growth in the overall sector. It has a $2.8 billion market cap, so it’s growing well.
The stock is up 23% in the past 12 months and 3% in year to date. But it also has a 5.9% dividend, which is certainly a nice kicker.
Speaking of income and growth plays…
Currently, my Portfolio Grader I used to find Growth Investor stocks is picking up plenty of buys in all kinds of sectors. One that I’m particularly excited about now is helping enable a major upgrade across the telecom industry, across the world.
The 5G Buildout Is an Incredible Opportunity for Investors Right Now
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your wireless internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G infrastructure play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has good fundamentals, too — making it a “Strong Buy” in my Portfolio Grader system now.
When you do, you’ll see how to claim a free copy of my investment report, The King of 5G “Turbo Button” Technology, which has full details on this company — and what makes it such a great buy now.
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.