2023 was a rough year for many of the top utilities stocks. The swift increase in interest rates by the Federal Reserve ate into utilities’ earnings. Moreover, bond rates were significantly more attractive, which had investors ignoring utility stocks.
However, things are looking up for utility stocks this year. For instance, the iShares U.S. Utilities ETF is up more than 16% in the past six months, in anticipation of interest rate cuts later this year. Moreover, with the heightened volatility in the stock market of late, it’s wise to invest in perennial businesses such as utilities to mitigate the market risk. Here are the three top utilities stocks to look into:
Top Utilities Stocks: York Water (YORW)
York Water Co (NASDAQ:YORW) is the oldest shareholder-owned water utility firm in Pennsylvania. It has operated for exactly 208 years, providing regulated water and wastewater services.
Moreover, it’s in a league of its own in terms of its mind-boggling dividend payout history, which spans over two centuries. It recently announced its 613th consecutive dividend payment, underscoring its enduring stability and capacity to withstand economic troubles.
Over the years, it has maintained a consistent business with steady single-digit revenue growth and strong double-digit profitability increases across major metrics. Much of this is due to the rapid growth in Pennsylvania’s population over the past 65 years. From 1958 to 2023, Pennsylvania’s population expanded from 11,058,000 to 12,961,683, representing a 17.31% jump. Also, from 2010 to 2022, the state grew in population in eight of those twelve years.
Moreover, following the pullback in utility stocks last year, YORW stock is trading at a sizeable discount to its historical pricing metrics.
American Electric Power (AEP)
Based in Columbus, Ohio, American Electric Power (NASDAQ:AEP) is a massive force in the U.S. electric utility space, providing energy to more than five million customers in 11 states. It owns roughly 38,000 megawatts of generating capacity, positioning it as one of the country’s largest electricity producers. Moreover, its stock is trading mostly in the green this year, losing almost 9% of its value in 2023. Nevertheless, it trades at 2.22 times forward sales estimates, 14% lower than its 5-year average, making it an attractive buy at this time.
AEP’s strong positioning in the economically vibrant Midwest and Ohio Valley has proven pivotal for its success. These regions are not only manufacturing powerhouses but have also seen a healthy influx of millennials. The Midwest and Ohio Valley have witnessed an elevated share of the millennial generation due to significant net migration above the national average. Moreover, it boasts an excellent dividend profile, with 14 consecutive years of growth and a 4% yield.
Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure Partners (NYSE:BIP) is another leading pick in the utility space, and it that’s been an excellent dividend stock over the years. It yields an amazing 5.84%, with 15 consecutive years of payout growth, while trading at just 0.7 times forward sales estimates.
Furthermore, it operates a high-growth business, managing multiple utility and infrastructure businesses with extensive transportation networks. Its diverse portfolio includes North American rail services, U.K. ports, and other activities.
Despite the challenges posed by high-interest rates last year, Brookfield Infrastructure Partners demonstrated its strategic prowess. It strategically divested less profitable parts of its business to concentrate on high-growth areas. This proactive approach, coupled with plans to sell an additional $2 billion in assets, solidifies its position. Moreover, analysts at Tipranks rate BIP stock as a ‘strong buy’, projecting a more than 32% upside from its current price levels. In summary, BIP stock presents a compelling opportunity for investors seeking healthy upside potential while managing their portfolio risk.
On the date of publication, Muslim Farooque 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.
