7 Utility Stocks to Buy as Inflation’s Grip Tightens

utility stocks - 7 Utility Stocks to Buy as Inflation’s Grip Tightens

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Well before the shattering of the modern global order, inflation represented a massive problem. From pain at the pump to sticker shock at the grocery aisle, prices only seemed to have one direction, up. With the Russian invasion of Ukraine, the fragility of the economic recovery became cruelly exposed. Still, if there’s one sector that should survive and possibly thrive, it’s utility stocks.

Underlining this market segment is its indispensability. You can go without your caramel-flavored double-shot latte at a trendy coffee shop. But you can’t go without electricity. When you flip on the switch, you expect something to happen. Similarly, when you push down on the handle following usage of the facilities, you expect the material to go away.

That’s the beauty of utility stocks: You don’t really think about them until you need to.

And under the current circumstances, there’s going to be a lot of thinking going on. True, utility stocks are not without risks. However, since we can’t live without the underlying businesses, they’ll be the last to suffer personal budget cuts. It’s cynical but that’s reality.

If you’re looking for utility stocks to buy, here are seven to keep on your radar:

  • NextEra Energy (NYSE:NEE)
  • Exelon (NASDAQ:EXC)
  • Duke Energy (NYSE:DUK)
  • Sempra Energy (NYSE:SRE)
  • Dominion Energy (NYSE:D)
  • Essential Utilities (NYSE:WTRG)
  • Waste Management (NYSE:WM)

Utility Stocks to Buy: NextEra Energy (NEE)

Nextra Energy (NEE) website on a mobile phone screen

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Specializing in renewable energy infrastructures, NextEra Energy has lone been relevant as the political climate started pivoting to sustainable solutions. True, some of the policies under former President Donald Trump’s administration may have dragged the impetus toward climate-friendly initiatives, but President Joe Biden’s White House appears (at least on paper) determined to bring ecologically responsible policies to the forefront.

But nothing gets the wheels moving like desperation, which is why NextEra Energy may be one of the winners among utility stocks. Admittedly, on a year-to-date basis, NEE distracts with a double-digit loss at the time of writing. However, as a Bloomberg reporter pointed out, Russia’s dangerously destabilizing decision to invade Ukraine brought heightened urgency to renewable infrastructure.

Should projects like wind and solar power become more integrated with modern societies, this could potentially lessen exposure of western countries to those with questionable profiles, to put it diplomatically. Therefore, NEE might be a long-term idea among utility stocks to consider for patient investors.

Exelon (EXC)

The logo for Exelon (EXC) is visible at the top of an office building.

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Back in the spring of 2021, the Chicago Tribune reported that Exelon lost nearly $300 million in the first quarter of that year. Of course, the company blamed the Texas cold snap, a tragic event that took innocent lives and left others reeling. It’s a terrible circumstance that Texans are not likely to forget anytime soon.

However, the freak weather event is also a lesson in the vitality of utility stocks. In another Chicago Tribune article, the news agency laid out its case for why Exelon contributed to Texas’ power nightmare. Let’s face it, EXC is not the first among utility stocks to generate controversy, nor will it be the last.

But the overriding issue is that utility stocks are indispensable. In many areas, no other alternatives exist, meaning that the money is going to flow in no matter what. Unsurprisingly, then, EXC is positive on a YTD basis and is up 42% during the trailing year.

Utility Stocks to Buy: Duke Energy (DUK)

The logo for Duke Energy (DUK) is seen on a sign at one of the company's offices.

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A classic go-to when discussing utility stocks to buy, Duke Energy brings a lot to like to the table. Acquiring shares gets you access to its 3.8% dividend yield. With stability at a high premium, that yield is worth much more under the context of the current market environment.

In addition, I like that Duke Energy covers the eastern states, namely the Carolinas, Florida, Ohio, Kentucky and Indiana. As multiple agencies have covered, the Carolinas represent popular millennial destination spots for cost of living and other reasons.

Most importantly, Duke is a stalwart among utility stocks with a proven track record. In 2020, revenue understandably dipped 5% against 2019’s result, but the company was back on track in 2021 with pre-pandemic norms. As well, net income last year was $3.9 billion, up 4% from 2019’s tally.

Sempra Energy (SRE)

The logo for Sempra (SRE) is seen at the top of an office building.

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Sempra Energy is so fundamental to California that it’s essentially a tax to those that live in the southern regions of the Golden State. I would know personally, because I just got hit hard by Sempra, even though I didn’t do anything differently.

That’s because Sempra Energy and its subsidiaries collectively form a powerful political lobby. Therefore, it’s no stranger to controversy. But the fact is, there’s nothing regular people can do about it. When you flip the switch and nothing happens, that’s dangerous for society.

Yes, I’m taking the narrative of SRE to a rather gloomy area. But here’s the point: we already live in gloomy times. Yet that’s no excuse to not pay the bills, which is why utility stocks are cynically viable.

Utility Stocks to Buy: Dominion Energy (D)

The logo for Dominion Energy (D) is seen at the top of an office building.

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A solid idea for those seeking more protection than capital gains, Dominion Energy is up around 12% over the trailing year. Further, it provides a dividend yield of 3.3%. That’s a bit below the average yield for utility stocks of 3.75%. Still, the combination of reliability and passive income may be too good for some investors to pass up.

What I really like about D stock, though, is its coverage area. Focusing on services in Virginia and North Carolina, Dominion is putting its eggs in a very viable basket. Virginia’s population grew 7.9% between 2010 and 2020, a slightly faster pace than the rest of the nation. We might continue to see positive growth considering the ridiculous cost of living in other trendy states.

As for North Carolina, it too is growing, adding 112,000 people (a gain of 1.1%) between April 2020 and July 2021. With utility stocks, you want to invest longer term in names that are experiencing a widening consumer base, which is a major selling point for Dominion.

Essential Utilities (WTRG)

A photo of water being poured into a glass that's sitting on a table.

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While many discussions on utility stocks tend to focus on power delivery, it’s important not to forget about our most precious resource, water. Indeed, with drought impacting many states, particularly in the southwest region, water resources and services will likely command a premium. What’s worse, Californians are saving less water even as drought conditions worsen, per the Los Angeles Times.

Whether you live in California or not is besides the point. Broadly speaking, it comes down to basic economic principles, supply and demand. Thus, I’m bullish on Essential Utilities if only for purely cynical reasons.

Providing drinking water and wastewater treatment, Essential Utilities has stakes in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia. From an investor’s perspective, we have a delightful combination: states that benefit from strong migration patterns and the delivery of a commodity that no one can live without.

Utility Stocks to Buy: Waste Management (WM)

Image of green Waste Management (WM) branded truck in the foreground and building with Waste Management flag in the background.

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Before you get ready to fire up an email, Waste Management might not technically qualify as belonging to a list of utility stocks. Typically, utilities deal with businesses delivering something to you, mostly power and water. Waste Management is a business that takes stuff away from you. Still, it’s the stuff that you don’t want nor need, making WM a critical public service.

From an environmental point of view, Waste Management the company and the concept will only grow in importance. Per Frontier Group, in 2018 alone, “the U.S. threw out over 292 million tons of municipal solid waste (MSW) — the materials discarded by homes, businesses and institutions, such as universities and libraries. Americans throw out 4.9 pounds of trash per person every day — that’s nearly 1,800 pounds of materials per American every year.”

That garbage doesn’t just disappear to some magical place. With more people throwing more stuff away, WM is almost guaranteed to be a viable investment.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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