We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Income Investors Shouldn't Ignore These 3 Utilities Stocks
Read MoreHide Full Article
The Zacks Utilities sector has performed relatively well in 2022, down roughly 6% vs. the S&P 500’s decline of 17%.
Consumers have a never-ending need for the services these companies provide, helping explain why the sector has been a brighter spot during a historically-volatile 2022.
In addition to being defensive in nature, stocks in the Utilities sector generally carry solid dividend payouts, providing the cherry on top for investors seeking an income stream.
For those interested in strong stocks from the realm, three top-ranked companies that reward their shareholders handsomely – NW Natural (NWN - Free Report) , FirstEnergy Corp. (FE - Free Report) , and American Electric Power Company, Inc. (AEP - Free Report) – could all be considered.
Below is a chart illustrating the year-to-date performance of all three stocks with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
As we can see, all three stocks have outperformed the S&P 500 in 2022, putting their defensive nature on full display.
Let’s take a deeper dive into each one.
NW Natural
NW Natural (formerly known as Northwest Natural Gas Company) is a local distribution company that provides utility services and renewable energy to millions of consumers.
Analysts have taken a bullish stance on the company’s earnings outlook as of late, helping land the stock into a favorable Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
NWN’s annual dividend yield currently sits at 4.1%, modestly above its Zacks Utilities sector average of 3.4%.
Further, in its latest earnings release, the company laid out growth targets for the next five years, with one of them focusing on a strong and growing dividend – definitely what income-focused investors like to hear.
Image Source: Zacks Investment Research
American Electric Power Company
American Electric Power Company is a public utility holding company that, through directly and indirectly owned subsidiaries, generates, transmits, and distributes electricity, natural gas, and other commodities. AEP boasts a Zacks Rank #2 (Buy).
The company’s annual dividend yields a solid 3.7% paired with a 5.5% five-year annualized dividend growth rate and a payout ratio sitting at 62% of earnings.
AEP’s targeted payout ratio is 60% – 70%, precisely what it has achieved.
Image Source: Zacks Investment Research
AEP posted a solid quarter in its latest release, exceeding the bottom-line estimate by more than 3% and revenue expectations by nearly 11%. In fact, AEP has exceeded revenue and EPS estimates in each of its last four quarters.
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
For the cherry on top, the company carries a favorable growth profile; earnings are forecasted to climb 6% in its current fiscal year (FY22) and a further 5.8% in FY23.
The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 12% and 2.3% in FY22 and FY23, respectively.
Image Source: Zacks Investment Research
FirstEnergy Corp.
Through its subsidiaries and affiliates, FirstEnergy engages in electricity transmission, distribution, and generation. FE sports a Zacks Rank #2 (Buy).
FE rewards its shareholders via its annual dividend that currently yields a sector-beating 4.2% paired with a payout ratio sitting at 64% of its earnings.
Further, the company has upped its dividend payout twice over the last five years, translating to a 2% five-year annualized dividend growth rate.
Image Source: Zacks Investment Research
Shares currently trade at a 15.3X forward earnings multiple, precisely at its five-year median value and just modestly above its Zacks Utilities sector average of 14.9X.
FE carries a Style Score of a B for Value.
Image Source: Zacks Investment Research
Bottom Line
The Zacks Utilities sector has put its defensive nature on display year-to-date, outperforming the general market by a fair margin.
And in a historically volatile 2022, adding an extra layer of defense into portfolios is something investors should highly consider.
Companies in the realm experience reliable, predictable demand thanks to their services constantly being in need.
In addition, stocks in the Utilities sector generally pay dividends, providing a cushion to drawdowns in other positions.
For those looking to tap into the defensive sector – NW Natural (NWN - Free Report) , FirstEnergy Corp. (FE - Free Report) , and American Electric Power Company, Inc. (AEP - Free Report) – could all be considered.
All three stocks are highly-ranked, telling us that they’ve witnessed positive earnings estimate revisions as of late.
And to top it off, all three reward their shareholders handsomely.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Income Investors Shouldn't Ignore These 3 Utilities Stocks
The Zacks Utilities sector has performed relatively well in 2022, down roughly 6% vs. the S&P 500’s decline of 17%.
Consumers have a never-ending need for the services these companies provide, helping explain why the sector has been a brighter spot during a historically-volatile 2022.
In addition to being defensive in nature, stocks in the Utilities sector generally carry solid dividend payouts, providing the cherry on top for investors seeking an income stream.
For those interested in strong stocks from the realm, three top-ranked companies that reward their shareholders handsomely – NW Natural (NWN - Free Report) , FirstEnergy Corp. (FE - Free Report) , and American Electric Power Company, Inc. (AEP - Free Report) – could all be considered.
Below is a chart illustrating the year-to-date performance of all three stocks with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
As we can see, all three stocks have outperformed the S&P 500 in 2022, putting their defensive nature on full display.
Let’s take a deeper dive into each one.
NW Natural
NW Natural (formerly known as Northwest Natural Gas Company) is a local distribution company that provides utility services and renewable energy to millions of consumers.
Analysts have taken a bullish stance on the company’s earnings outlook as of late, helping land the stock into a favorable Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
NWN’s annual dividend yield currently sits at 4.1%, modestly above its Zacks Utilities sector average of 3.4%.
Further, in its latest earnings release, the company laid out growth targets for the next five years, with one of them focusing on a strong and growing dividend – definitely what income-focused investors like to hear.
Image Source: Zacks Investment Research
American Electric Power Company
American Electric Power Company is a public utility holding company that, through directly and indirectly owned subsidiaries, generates, transmits, and distributes electricity, natural gas, and other commodities. AEP boasts a Zacks Rank #2 (Buy).
The company’s annual dividend yields a solid 3.7% paired with a 5.5% five-year annualized dividend growth rate and a payout ratio sitting at 62% of earnings.
AEP’s targeted payout ratio is 60% – 70%, precisely what it has achieved.
Image Source: Zacks Investment Research
AEP posted a solid quarter in its latest release, exceeding the bottom-line estimate by more than 3% and revenue expectations by nearly 11%. In fact, AEP has exceeded revenue and EPS estimates in each of its last four quarters.
Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
For the cherry on top, the company carries a favorable growth profile; earnings are forecasted to climb 6% in its current fiscal year (FY22) and a further 5.8% in FY23.
The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 12% and 2.3% in FY22 and FY23, respectively.
Image Source: Zacks Investment Research
FirstEnergy Corp.
Through its subsidiaries and affiliates, FirstEnergy engages in electricity transmission, distribution, and generation. FE sports a Zacks Rank #2 (Buy).
FE rewards its shareholders via its annual dividend that currently yields a sector-beating 4.2% paired with a payout ratio sitting at 64% of its earnings.
Further, the company has upped its dividend payout twice over the last five years, translating to a 2% five-year annualized dividend growth rate.
Image Source: Zacks Investment Research
Shares currently trade at a 15.3X forward earnings multiple, precisely at its five-year median value and just modestly above its Zacks Utilities sector average of 14.9X.
FE carries a Style Score of a B for Value.
Image Source: Zacks Investment Research
Bottom Line
The Zacks Utilities sector has put its defensive nature on display year-to-date, outperforming the general market by a fair margin.
And in a historically volatile 2022, adding an extra layer of defense into portfolios is something investors should highly consider.
Companies in the realm experience reliable, predictable demand thanks to their services constantly being in need.
In addition, stocks in the Utilities sector generally pay dividends, providing a cushion to drawdowns in other positions.
For those looking to tap into the defensive sector – NW Natural (NWN - Free Report) , FirstEnergy Corp. (FE - Free Report) , and American Electric Power Company, Inc. (AEP - Free Report) – could all be considered.
All three stocks are highly-ranked, telling us that they’ve witnessed positive earnings estimate revisions as of late.
And to top it off, all three reward their shareholders handsomely.