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4 Low-Beta Utility Stocks to Buy Amid Rate Cut Uncertainty
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Fears of a slowing economy and a delay in rate cuts are rising once again as inflation is making an accent. The Federal Reserve, too, appears to be concerned and undecided about the timing of the first cut in interest rates.
The minutes of the Federal Reserve’s March FOMC meeting, which was released last week, revealed that officials are concerned that inflation isn’t declining fast enough, although they are hopeful about cutting rates this year.
The Federal Reserve left interest rates unchanged in its current range of 5.25-5.5% in its March meeting and said that it plans three rate cuts of 25 basis points each by the end of this year. However, in the post-meeting statement, the Fed said that it won’t start cutting rates until officials “gained greater confidence” that Inflation is steadily declining toward its target range of 2%.
Concerns escalated when inflation started moving north this year after falling below 3% at the end of 2023.
The consumer price index (CPI) rose 0.4% sequentially in March and 3.5% from the year-ago levels. Also, the producer price index (PPI) rose 0.2% month over month in March, lower than the expectations of a rise of 0.3%. Year over year, PPI increased 2.1% in March after increasing 1.6% in February.
The Federal Reserve also said that loosening the monetary policy could add to price pressures.
The Fed’s comments, coupled with the recent inflation data, signal uncertainty over the time of the first cut in interest rates. This uncertainty could keep markets volatile for a longer period.
Our Picks
Given this situation, it would be wise to invest in defensive stocks like utilities. Four such stocks are American Water Works Company, Inc. (AWK - Free Report) , Portland General Electric Company (POR - Free Report) , Atmos Energy Corporation (ATO - Free Report) and Global Water Resources, Inc. (GWRS - Free Report) .
Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.43%.
Portland General Electric Company is a vertically integrated electric utility that serves residential, commercial and industrial customers in Oregon. POR has more than a century of experience in power delivery. Portland General Electric Company generates power from a diverse mix of resources, including hydropower, coal and natural gas.
Portland General Electric Company has an expected earnings growth rate of 29% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. POR presently carries a Zacks Rank #2. Portland General Electric Company has a beta of 0.57 and a current dividend yield of 4.68%.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.82%.
Global Water Resources, Inc. is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently carries a Zacks Rank #2. Global Water Resources has a beta of 0.97 and a current dividend yield of 2.47%.
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4 Low-Beta Utility Stocks to Buy Amid Rate Cut Uncertainty
Fears of a slowing economy and a delay in rate cuts are rising once again as inflation is making an accent. The Federal Reserve, too, appears to be concerned and undecided about the timing of the first cut in interest rates.
The minutes of the Federal Reserve’s March FOMC meeting, which was released last week, revealed that officials are concerned that inflation isn’t declining fast enough, although they are hopeful about cutting rates this year.
The Federal Reserve left interest rates unchanged in its current range of 5.25-5.5% in its March meeting and said that it plans three rate cuts of 25 basis points each by the end of this year. However, in the post-meeting statement, the Fed said that it won’t start cutting rates until officials “gained greater confidence” that Inflation is steadily declining toward its target range of 2%.
Concerns escalated when inflation started moving north this year after falling below 3% at the end of 2023.
The consumer price index (CPI) rose 0.4% sequentially in March and 3.5% from the year-ago levels. Also, the producer price index (PPI) rose 0.2% month over month in March, lower than the expectations of a rise of 0.3%. Year over year, PPI increased 2.1% in March after increasing 1.6% in February.
The Federal Reserve also said that loosening the monetary policy could add to price pressures.
The Fed’s comments, coupled with the recent inflation data, signal uncertainty over the time of the first cut in interest rates. This uncertainty could keep markets volatile for a longer period.
Our Picks
Given this situation, it would be wise to invest in defensive stocks like utilities. Four such stocks are American Water Works Company, Inc. (AWK - Free Report) , Portland General Electric Company (POR - Free Report) , Atmos Energy Corporation (ATO - Free Report) and Global Water Resources, Inc. (GWRS - Free Report) .
Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high-dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Water Works Company, Inc. provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.43%.
Portland General Electric Company is a vertically integrated electric utility that serves residential, commercial and industrial customers in Oregon. POR has more than a century of experience in power delivery. Portland General Electric Company generates power from a diverse mix of resources, including hydropower, coal and natural gas.
Portland General Electric Company has an expected earnings growth rate of 29% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. POR presently carries a Zacks Rank #2. Portland General Electric Company has a beta of 0.57 and a current dividend yield of 4.68%.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.82%.
Global Water Resources, Inc. is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently carries a Zacks Rank #2. Global Water Resources has a beta of 0.97 and a current dividend yield of 2.47%.