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.
24/7 Wall St.Atmos Energy
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.
Atmos Energy’s Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately 3 million residential, commercial, public authority and industrial customers. As of September 30, 2021, it owned 71,921 miles of underground distribution and transmission mains.
The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage reservoirs in Texas. It also provides ancillary services to the pipeline industry, including parking arrangements, lending and inventory sales. As of September 30, 2021, it owned 5,699 miles of gas transmission lines.
Shareholders receive a 2.39% dividend. Morgan Stanley recently lifted its $129 target price on Atmos Energy stock to $140. The consensus target is $125.44, and Friday’s closing print was $114.01.
Consolidated Edison
This old-school utility stock offers income investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.5 million customers in New York City and Westchester County; gas to around 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to about 1,700 customers in parts of Manhattan.
Consolidated Edison owns 62 area distribution substations and various distribution facilities; 39 transmission substations and 62 area stations; electric generation facilities with an aggregate capacity of 724 megawatts that run on gas and fuel oil; 4,348 miles of mains and 369,791 service lines for natural gas distribution; and one steam-electric generating station and five steam-only generating stations.
The company operates 572 circuit miles of transmission lines; 14 transmission substations; 86,794 in-service line transformers; 3,994 pole miles of overhead distribution lines; and 1,889 miles of underground distribution lines, as well as 1,867 miles of mains and 105,482 service lines for natural gas distribution. In addition, it is involved in the sale and related hedging of electricity to retail customers, and the provision of energy-related products and services to wholesale and retail customers.
Investors receive a 3.24% dividend. Mizuho analysts have set their price target at $99. The consensus target is at $89.25, but Consolidated Edison stock closed on Friday at $97.41.
Duke Energy
Located in a growing part of the country, this is a very solid idea for investors now. Duke Energy Corp. (NYSE: DUK) is an energy company in the United States that operates through the following segments.
The Electric Utilities and Infrastructure segment generates, transmits, distributes and sells electricity generated from coal, hydroelectric, natural gas, oil, renewable generation and nuclear fuel. It also engages in the wholesale of electricity to municipalities, electric cooperative utilities and load-serving entities. This segment serves approximately 8.2 million customers in six states in the Southeast and Midwest regions of the United States, covering a service territory of approximately 91,000 square miles, and it owns approximately 50,259 megawatts (MW) of generation capacity.
Duke Energy’s Gas Utilities and Infrastructure segment distributes natural gas to residential, commercial, industrial and power generation natural gas customers, and it owns, operates and invests in pipeline transmission and natural gas storage facilities. It has approximately 1.6 million customers, including 1.1 million customers in North Carolina, South Carolina and Tennessee, as well as 550,000 customers in southwestern Ohio and northern Kentucky.
The Commercial Renewables segment acquires, owns, develops, builds and operates wind and solar renewable generation projects, including non-regulated renewable energy and energy storage services to utilities, electric cooperatives, municipalities and corporate customers. It has 23 wind, 178 solar and two battery storage facilities, as well as 71 fuel cell locations, with a capacity of 3,554 MW across 22 states.
The dividend yield is 3.68%. KeyCorp’s $116 target price compares with a consensus target for Duke Energy stock of $115.16. The stock closed at $106.11 on Friday.
Exelon
This top utility stock also makes good sense now for conservative investors. Exelon Corp. (NYSE: EXC) engages in the energy generation, delivery, and marketing businesses in the United States and Canada. It owns nuclear, fossil, wind, hydroelectric, biomass and solar generating facilities.
The company also sells electricity to wholesale and retail customers, and it sells natural gas, renewable energy and other energy-related products and services. Furthermore, it is involved in the purchase and regulated retail sale of electricity and natural gas, as well as the transmission and distribution of electricity and distribution of natural gas to retail customers.
The company also offers support services, including legal, human resources, information technology, financial, supply management, accounting, engineering, customer operations, distribution and transmission planning, asset management, system operations and power procurement services. It serves distribution utilities, municipalities, cooperatives and financial institutions, as well as commercial, industrial, governmental and residential customers.
Exelon stock comes with a 3.12% dividend. The $51 BMO Capital Markets target price is above the $49.39 consensus target. The stock was last seen on Friday trading at $43.21.
Southern Company
This large-cap utility leader makes sense for very conservative investors as well. Southern Company (NYSE: SO) engages in the generation, transmission and distribution of electricity. It constructs, acquires, owns and manages power generation assets, including renewable energy and battery energy storage projects. and sells electricity in the wholesale market.
Southern Company distributes natural gas in Illinois, Georgia, Virginia and Tennessee, as well as provides gas marketing services, wholesale gas services and gas pipeline investments operations. It constructs, operates, and maintains 75,924 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial and industrial customers.
The company serves approximately 8.6 million electric and gas utility customers. It also owns or operates 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear-generating stations, 13 combined cycle/cogeneration stations, 44 solar facilities, 13 wind facilities, one fuel cell facility and one battery storage facility. And it provides products and services in the areas of energy efficiency and utility infrastructure. In addition, the company offers digital wireless communications and fiber optics services.
Shareholders receive a 3.52% dividend. Southern Company stock now has an $87 target price at Argus up from a recent $83. The consensus target is $76.44, and shares closed on Friday at $77.25.
Xcel Energy
Conservative investors looking for ideas will like this dependable dividend-paying utility stock. Xcel Energy Inc. (NASDAQ: XEL) generates, purchases, transmits, distributes and sells electricity generated through coal, nuclear, natural gas, hydroelectric, solar, biomass, oil, wood/refuse and wind energy sources. It also purchases, transports, distributes and sells natural gas to retail customers, as well as transports customer-owned natural gas.
In addition, the company develops and leases natural gas pipelines, and storage and compression facilities, and it invests in rental housing projects, as well as procures equipment for the construction of renewable generation facilities. It serves residential, commercial and industrial customers in the portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. The company sells electricity to approximately 3.7 million customers and natural gas to approximately 2.1 million customers.
Investors receive a 2.64% dividend. The Barclays price objective is $78, while the consensus target is $76.73. The final Xcel Energy stock trade on Friday was reported at $73.90.
Seven top stocks in the utility sector that have Buy ratings and come with very dependable dividends might be just the place to ride out the storm. The old saying “you can’t fight the Fed” works both ways. Even though markets are very oversold, the rate hikes will continue throughout this year and likely into 2023. So, stocks may continue to struggle until the rate-hiking cycle is complete.
Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)
Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.
Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.
Click here now to get started.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
