The utility industry is evolving rapidly, driven by clean energy adoption, grid modernization, and digital innovation, amid regulatory and consumer demand for sustainability.
Amid such conducive trends, investors could consider looking into fundamentally sound utility stocks, NextEra Energy, Inc. (NEE), The Southern Company (SO), and Duke Energy Corporation (DUK), with high dividends.
The utility industry is navigating a transformative period driven by the dual imperatives of decarbonization and digitalization. Increasing commitments to renewable energy and net-zero targets are reshaping traditional power generation and distribution models. The utility market is expected to reach $6.89 trillion in 2024 at a CAGR of 6.9%.
Moreover, the Biden administration's emphasis on clean energy, highlighted by initiatives such as the Powering Affordable Clean Energy (PACE) program with $140 million allocated for clean energy projects, positions utility stocks heavily invested in green energy to see even greater gains.
Additionally, utilities are considered dividend stalwarts with a steady demand due to the nature of the products they offer. Considering these factors, let’s take a look at the fundamentals of the three utility stocks, beginning with the third one.
Stock #3: NextEra Energy, Inc. (NEE)
NEE generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, natural gas, and other clean energy.
In terms of the trailing-12-month gross profit margin, NEE’s 62.11% is 37.2% higher than the 45.26% industry average. Likewise, its 7.03% trailing-12-month net income margin is 109.6% higher than the 12.64% industry average. Furthermore, the stock’s 33.22% trailing-12-month EBIT margin is 54.3% higher than the 21.53% industry average.
NEE has paid dividends for 29 consecutive years. Its annual dividend is $2.06, which translates to a yield of 2.6% at the current share price. Its four-year average dividend yield is 2.30%. Moreover, the company’s dividend payouts have increased at a CAGR of 10.2% over the past three years.
For the third quarter that ended September 30, 2024, NEE reported operating revenues of $19.37 billion. Its adjusted earnings came in at $5.97 billion, or $2.90 per share, up 211% and 208.5% year-over-year, respectively. Also, as of September 30, 2024, the company’s total assets were $186.01 billion, compared to $177.49 billion as of December 31, 2023.
Analysts expect NEE’s revenue for the fourth quarter ending December 2024 to increase 11.3% year-over-year to $7.66 billion. It surpassed Street EPS estimates in each of the trailing quarters.
Shares of NEE have gained 43.1% over the past nine months to close the last trading session at $79.
NEE’s POWR Ratings reflect its outlook. NEE has a B grade for Momentum. It is ranked #26 among 57 stocks in the Utilities - Domestic industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Click here to access the additional NEE ratings (Quality, Stability, Sentiment, Growth, and Value).
Stock #2: The Southern Company (SO)
SO engages in the generation, transmission, and distribution of electricity. The company develops, constructs, acquires, owns, and manages power generation assets, such as renewable energy projects, and sells electricity in the wholesale market; distributes natural gas in Illinois, Georgia, Virginia, and Tennessee; and offers gas marketing services.
In terms of the trailing-12-month gross profit margin, SO’s 49.97% is 10.4% higher than the 45.26% industry average. Its 29.73% trailing-12-month EBIT margin is 38.1% higher than the 21.53% industry average.
SO’s annual dividend is $2.88, which translates to a yield of 3.2% at the current share price. Its four-year average dividend yield is 3.86%. Moreover, the company’s dividend payouts have increased at a CAGR of 3% over the past three years.
During the third quarter, which ended September 30, 2024, SO’s total operating revenues increased by 4.2% year-over-year to $7.27 billion. The company’s net income and EPS, excluding items, grew marginally year-over-year to $1.56 billion and $1.43, respectively.
Street expects SO’s revenue for the fourth quarter ended December 2024, to increase 3.4% year-over-year to $6.25 billion. The company surpassed consensus EPS estimates in each of the trailing four quarters.
SO’s stock gained 32.5% over the past nine months to close the last trading session at $89.13.
SO’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Momentum. SO is ranked #21 in the same industry.
Beyond what is stated above, we’ve also rated SO for Sentiment, Growth, Stability, Value, and Quality. Get all SO ratings here.
Stock #1: Duke Energy Corporation (DUK)
DUK and its subsidiaries operate as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I).
DUK’s annual dividend is $4.18, which translates to a yield of 3.57% at the current share price. Its four-year average dividend yield is 4%. Moreover, the company’s dividend payouts have increased at a CAGR of 2% over the past three years.
DUK’s trailing-12-month gross profit margin of 49.90% is 10.2% higher than the 45.26% industry average. Likewise, the stock’s trailing-12-month EBITDA margin of 47.41% is 27.6% higher than the 37.17% industry average.
For the fiscal third quarter that ended September 30, 2024, DUK’s total operating revenues increased 4.9% year-over-year to $8.15 billion. The net income and net income per common share were reported at $1.32 billion and $1.60, respectively.
Analysts expect DUK’s revenue for the fourth quarter ending December to increase 1.2% year-over-year to $7.29 billion. Its EPS for the same quarter is expected to increase 11% year-over-year to $1.68. The company surpassed consensus revenue estimates in each of the trailing four quarters.
The stock has gained 16.6% over the past six months, closing the last trading session at $117.07.
DUK’s POWR Ratings reflect bright prospects. The stock has a B grade for Stability and Momentum. It is ranked #15 in the same industry.
In addition to the POWR Ratings highlighted above, one can access DUK’s ratings for Quality, Growth, Value, and Sentiment here.
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NEE shares were trading at $77.33 per share on Monday afternoon, down $1.34 (-1.70%). Year-to-date, NEE has gained 31.02%, versus a 28.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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