Investing in electric utility stocks can be a smart strategy for those seeking stable returns. These companies typically operate in regulated markets, providing essential services such as heat, water, and electricity that generate steady cash flow, even during economic downturns.
Amid this backdrop, investors seeking long-term stability could consider adding fundamentally sound electric utility stocks NextEra Energy, Inc. (NEE), The Southern Company (SO), and Duke Energy Corporation (DUK) to their portfolios.
With a surging population, rapid urbanization, and the adoption of modern digital technologies, the electricity demand continues to expand, propelling the growth of the utility market. According to the Research and Markets report, the utilities market is expected to reach $8.83 trillion by 2028, growing at a CAGR of 6.4%.
The global push toward green revolution led to a significant shift from fossil fuels to renewable energy sources such as wind, solar, and hydroelectric power. Electric utilities are at the forefront of this transition to clean energy sources. Moreover, governments worldwide are implementing policies and incentives to encourage the adoption of clean energy.
In this article, we will discuss the fundamentals of three top Utilities – Domestic stock picks NEE, SO, and DUK, which are known for their robust dividend payouts, starting with the third choice.
Stock #3: NextEra Energy, Inc. (NEE)
NEE generates, transmits, and sells electric power to retail and wholesale customers. It generates electricity through wind, solar, nuclear, natural gas, and other clean energy. Also, it develops and operates long-term contracted assets consisting of clean energy solutions, such as renewable generation facilities, battery storage projects, and more.
On July 25, NEE’s Board of Directors declared a regular quarterly common stock dividend of $0.515 per share, payable on September 16, 2024, to shareholders of record on August 30, 2024.
NEE pays an annual dividend of $2.06, which translates to a yield of 2.57% at the current share price. Its four-year average dividend yield is 2.26%. Moreover, the company’s dividend payouts have increased at a CAGR of 10.6% over the past five years. NextEra Energy has raised its dividends for 28 consecutive years.
On June 7, NextEra Energy Resources LLC, NEE’s subsidiary, and Entergy Corp. (ETR) announced a joint agreement to accelerate the development of up to 4.5 GW of new solar and energy storage projects. This deal strengthens NEE’s long-standing collaboration with Entergy.
NEE’s trailing-12-month gross profit margin of 61.33% is 36.4% higher than the 45% industry average. Likewise, the stock’s trailing-12-month EBITDA margin of 54.48% is 49.1% higher than the industry average of 36.55%.
For the second quarter that ended June 30, 2024, NEE reported operating revenues of $ billion. Its adjusted earnings came in at $1.97 billion, or $0.96 per share, up 10.7% and 9.1% year-over-year, respectively. Also, as of June 30, 2024, the company’s total assets were $184.72 billion, compared to $177.49 billion as of December 31, 2023.
Analysts expect NEE’s revenue for the third quarter (ending September 2024) to increase 10.7% year-over-year to $7.94 billion. Its EPS for the current quarter is expected to grow 3.5% year-over-year to $0.91. Moreover, NEE surpassed the consensus EPS estimates in each of the trailing four quarters.
NEE’s stock has gained 44.1% over the past six months and 18.6% over the past year to close the last trading session at $79.52.
NEE’s POWR Ratings reflect its robust outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NEE has a B grade for Growth and Momentum. It is ranked #28 out of 59 stocks in the Utilities – Domestic industry. Click here to access NEE’s ratings for Value, Sentiment, Stability, and Quality.
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.
On July 15, SO announced a regular quarterly dividend of 72 cents ($0.72) per share on the company's common stock, payable September 6, 2024, to shareholders of record as of August 19, 2024. For 76 consecutive years, Southern Company has paid a quarterly dividend to its shareholders that is equal to or greater than the prior quarter.
SO pays an annual dividend of $2.88, which translates to a yield of 3.36% at the current share price. Its four-year average dividend yield is 3.94%. Moreover, the company has raised its dividends for 22 consecutive years.
SO’s trailing-12-month gross profit margin of 49.63% is 10.4% higher than the 44.96% industry average. Similarly, the stock’s trailing-12-month net income margin of 17.63% higher than the 12.50% industry average. Further, its trailing-12-month EBITDA margin of 48.53% is 37.8% higher than the 36.55% industry average.
During the second quarter ended June 30, 2024, SO’s total operating revenues increased 12.4% year-over-year to $6.46 billion. Its operating income rose 50.3% from the year-ago value to $1.94 billion. The company’s net income and EPS – excluding items grew 38.7% and 39.2% year-over-year to $1.20 billion and $1.10, respectively.
Street expects SO’s revenue and EPS for the fiscal year (ending December 2024) to increase 4.6% and 10.5% year-over-year to $26.41 billion and $4.03, respectively. Further, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of SO have surged 22.5% year-to-date and 25.1% over the past year to close the last trading session at $85.86.
SO’s sound fundamentals are reflected in its POWR Ratings. SO has a B grade for Growth and Momentum. Within the Utilities - Domestic industry, it is ranked #9 among 59 stocks.
To see SO’s ratings for Value, Sentiment, Stability, and Quality, click here.
Stock #1: Duke Energy Corporation (DUK)
DUK, through its subsidiaries, operates as an energy company. It operates through two segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I). Its electric utilities serve 8.4 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky and collectively own 54,800 megawatts of energy capacity.
On August 21, Duke Energy Florida’s comprehensive, multiyear rate agreement was approved by the Florida Public Service Commission. The agreement enables Duke Energy to continue making investments to reduce outages, shorten response times, meet future energy demands, and explore technologies to generate cost savings for its 2 million customers in Florida.
On July 15, DUK declared a quarterly cash dividend on its common stock of $1.045 per share, a rise of $0.02. The dividend is payable on September 16, 2024, to shareholders of record at the close of business on August 16, 2024. It also declared a quarterly cash dividend on its Series A preferred stock of $359.375 per share, payable on Sept. 16, 2024.
In addition, the company declared a semi-annual cash dividend on its Series B preferred stock of $24.375 per share, payable on Sept. 16, 2024. Duke Energy paid a cash dividend on its common stock for 98 consecutive years.
DUK’s trailing-12-month gross profit margin of 44.96% is 10.9% higher than the 44.96% industry average. Likewise, the stock’s trailing-12-month EBITDA margin of 47.63% is 30.3% higher than the 36.55% industry average.
For the second quarter that ended June 30, 2024, DUK’s total operating revenues increased 9% year-over-year to $7.17 billion. Its operating income rose 19.4% over the year-ago value to $1.71 billion. Also, net income and EPS available to DUK common stockholders stood at $921 million and $1.18, increases of 29% and 29.7% year-over-year, respectively.
Analysts expect DUK’s revenue to increase 1.9% year-over-year to $29.60 billion for the fiscal year ending December 2024. The consensus EPS estimate of $5.98 for the current year indicates an improvement of 7.5% year-over-year. In addition, the company topped consensus EPS estimates in all four trailing quarters.
Over the past six months, DUK’s stock has gained 23.7% and 26.1% over the past year to close the last trading session at $112.99.
DUK’s bright prospects are reflected in its POWR Ratings. The stock has a B grade for Growth, Momentum, and Stability. DUK is ranked #8 of 59 stocks in the Utilities – Domestic industry.
Click here to see DUK’s ratings for Value, Momentum, Stability, Sentiment, and Quality.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NEE shares were trading at $79.59 per share on Friday afternoon, up $0.07 (+0.09%). Year-to-date, NEE has gained 33.09%, versus a 18.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Top Electric Utility Stocks With Strong Dividends StockNews.com
