Friday’s dreadful close completed four losing weeks in a row. With the S&P 500 breaking through the 3,900 resistance level, there may not be any stopping the venerable index until it retests the June lows at 3,636. That is over 200 points below where we closed Friday. The question for many investors is what to do now. With a host of recession warning signs flashing (not the least of which is two quarters of negative GDP growth), it makes sense to do the simple and easiest thing and play it safe until the Federal Reserve is done raising rates.
The Fed will raise rates by 75 basis points on Wednesday, unless it ups the ante to a full percentage point. One sector that investors typically do not like when rates are going higher is utilities, but we are in a slightly different game now. Rates after Wednesday likely will be within 100 basis points of the terminal or target rate, at which the Fed will stop and hold rates. That has long been priced into the utility arena, and some of the biggest and safest stocks look very attractive now.
We screened our 24/7 Wall St. utility research database looking for Buy-rated stocks with strong and dependable dividends. The following seven top companies came up and look like solid ideas for growth and income investors looking for a safe haven. While they all are rated Buy at major Wall Street firms, it is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
American Electric Power
This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 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.
Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which also will be accretive.
American Electric Power stock investors receive a 3.11% dividend. Morgan Stanley has a $118 price target, while the consensus price target is $107.88. Shares closed on Friday at $100.36.
This utility stock is perfect for conservative investors looking for income. Atmos Energy Corp. (NYSE: ATO) engages in the regulated natural gas distribution and pipeline and storage businesses in the United States.
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