We have mentioned this numerous times recently, but we are currently in one of the longest stretches in the stock market without a 5% decline. Typically there are three a year, and we haven’t seen one since the summer of 2016. What does this mean for worried investors? Maybe nothing, or maybe quite a bit. The bottom line is that it wouldn’t hurt any portfolio to slide some risk out and move to a safer higher ground.
One of the safest sectors to move to is the utility stocks, and while the halcyon days of 2014 and 2015, when the stocks posted huge moves higher as rates plunged, are long gone, they remain a solid bet for conservative investors looking for safety and income, especially given the fourth quarter sell-off.
In a new report, SunTrust Robinson Humphrey lowered some of the price targets for 2018, but the firm still has five stocks that are rated Buy, and all make good sense for conservative accounts that also seek income.
This off-the-radar choice has solid upside potential from current levels and is a top mid-cap pick at SunTrust. AES Corp. (NYSE: AES) owns and operates power plants to generate and sell power to customers, such as utilities, industrial users and other intermediaries. The company also owns and operates utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors. It also generates and sells electricity to the wholesale market.
AES uses a range of fuels to generate electricity, including natural gas, coal, hydro, wind, energy storage, oil, diesel, petroleum coke, biomass, landfill gas and solar. The company owns and operates a generation portfolio of approximately 29,352 megawatts. It has operations in the United States, Chile, Colombia, Argentina, Brazil, Mexico, Central America, the Caribbean, Europe and Asia.
AES shareholders receive a 4.83% dividend. The SunTrust price objective for the shares is $15, and the Wall Street consensus target price is $12.71. Shares closed on Thursday at $10.76.
American Electric Power
This industry leader is a solid dividend paying company and remains a top pick in the sector across Wall Street. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.3 million customers in 11 states.
The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
Shareholders receive a 3.37% dividend. SunTrust has a price objective of $83, and the consensus price target is $75.73. Shares closed most recently at $73.65.
This top utility continues to raise its dividend regularly. Edison International (NYSE: EIX) generates electricity through hydroelectric, diesel, natural gas, gas fueled, combustion turbine, nuclear and photovoltaic sources. It supplies electricity primarily to residential, commercial, industrial, agricultural and other customers, as well as public authorities through transmission and distribution networks.
Edison International remains well positioned to compete in the market place. The company says that the billions it is spending on upgrades goes predominantly to its networks, and that it only owns about 15% of the generation that its customers consume. The other 85% is purchased on the open market.
Shareholders receive a 3.78% dividend. The $79 SunTrust price objective compares with a consensus target of $77.15. Shares closed Thursday at $63.94.
This top utility stock also makes good sense for conservative accounts. Shares have traded up some this year, but are still offering a great entry point. Exelon Corp. (NYSE: EXC) is the nation’s leading competitive energy provider, with expected 2017 revenues of approximately $31.7 billion. Headquartered in Chicago, Exelon does business in 48 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with approximately 32,500 megawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets.
Its Constellation business unit provides energy products and services to more than 2.5 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Exelon’s utilities deliver electricity and natural gas to more than 7.8 million customers in central Maryland, northern Illinois and southeastern Pennsylvania.
Exelon investors receive a solid 3.33% dividend. SunTrust has set its price target at $45. The consensus target is $43.10, and the stock closed Thursday at $3.30.
This rounds out the SunTrust Buy-rated utility stocks that pay big dividends. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, and 543,000 customers in 77 Kentucky counties and five counties in Virginia. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania and operates electricity distribution network for the Midlands, South West, and Wales in the United Kingdom.
In addition, the company offers a range of customer-care and back-office services to competitive retail energy suppliers, including customer enrollments; contract management; electronic data exchange; simple and complex billing; and call center operations comprising telemarketing, payment processing and collections of overdue accounts.
Investors receive a 5.11% dividend. The SunTrust price target is $42. The consensus target is $37.73, and PPL closed Thursday at $30.91.
Like we noted, the huge capital gains for the sector from the quantitative easing days may be in the rear-view mirror, but that doesn’t change the upside potential for these top companies. Even with rate increases continuing to hit the tape, those hikes will remain small and should have a negligible effect. These top stocks make excellent additions to growth and income total return portfolios looking for safety in 2018.