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4 S&P Utility Stocks to Add in Sluggish September

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September is a weak month for the stock market. Of the various reasons, the most common is that investors take time off during the summer months, which leads to an overall decline in trading volumes. Three leading indexes of the stock market, Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq, have historically performed the poorest in the month. Against the backdrop, investors can bet on domestic-focused utility stocks, which are steady performers and payout regular dividends.

Utility plays an important role in meeting basic requirements of households, businesses and the industry. The stability of electricity, water and natural gas services is not dependent on economic volatility. Utilities supply essentials that have no viable replacement. These are some of the factors that are the primary reasons for the steady performance of these companies

Utility companies continue to reward shareholders and raise their value through regular dividend and share buyback. This makes it a better investment options compared with bonds. Currently, the dividend yield of the Zacks Utility - Electric Power industry is 3.68%, higher than the S&P 500’s 1.76%.

 

In spite of U.S. administration’s recent move to revive the usage of coal, the utilities in the country are gradually shifting from coal and focusing on other fuel sources, which emit negligible volumes of carbon dioxide.

However, capital intensive utilities still have their share of weaknesses. Stringent emission rules, weather fluctuation and higher debt loads amid rising interest rates are major concerns for such entities.

Per out latest Earnings Preview, third-quarter earnings growth for Zacks Utility sector is pegged at 5.5% compared with the Zacks S&P 500 Composite’s 18.1%.

Selecting the Right Ones

Investment in equity market involves huge risk as it is a difficult task to select the right stock among many options. We have short listed five electric utility stocks, which carry a Zacks Rank #2 (Buy), have delivered average positive surprises in the past four quarters and projected an upward movement in their 2018 & 2019 Zacks Consensus Estimate in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, the shares of the companies have fared better than the industry and the Zacks S&P 500 composites in the past six months.


 

FirstEnergy Corporation (FE - Free Report) delivered an average positive earnings surprise of 4.74% in the past four quarters. The Zacks Consensus Estimate for 2018 and 2019 earnings moved up 3.0% and 0.4% in the past 60 days, respectively. The company’s expected EPS growth for the next five years is pegged at 6%. FirstEnergy has a dividend yield of 3.79%, higher than S&P 500 Composite’s 1.78%. In the past six months, the company’s shares have gained 13.0%.

IDACORP, Inc. (IDA - Free Report) delivered an average positive earnings surprise of 10.10% in the past four quarters. The Zacks Consensus Estimate for 2018 and 2019 earnings inched up 2.1% and 0.9% in the past 60 days, respectively. The company’s expected EPS growth for the next five years is pegged at 2.80%. IDACORP has a dividend yield of 2.37%.In the past six months, the company’s shares have gained 19.3%.

DTE Energy Company (DTE - Free Report) delivered an average positive earnings surprise of 5.69% in the past four quarters. The Zacks Consensus Estimate for 2018 and 2019 earnings moved up 6.7% and 3.6% in the past 60 days, respectively. The company’s expected EPS growth for the next five years is pegged at 5.30%. DTE Energy has a dividend yield of 3.12%. In the past six month, the company’s shares have increased 11.1%.

Ameren Corporation (AEE - Free Report) delivered an average earnings surprise of 7.69% in the past four quarters. The Zacks Consensus Estimate for 2018 and 2019 earnings moved up 5.6% and 0.6% in the past 60 days, respectively. The company’s expected EPS growth for the next five years is pegged at 6.60%. Ameren has a dividend yield of 2.80%. In the past six month, the company’s shares have returned 19.7%.

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