The utility sector, which includes companies supplying electricity, natural gas, and water, is known for its defensive nature, given the consistent demand for these services irrespective of economic cycles.
Although rising input costs and labor constraints are leading to increasing electricity and gas prices, the inelastic demand for these resources, especially this summer, should help companies in this space grow significantly. Moreover, long-term contracts with various governments should help utility companies perform steadily.
In addition to the non-cyclical nature of business, impressive dividend payouts of utility companies make them attractive to investors amid the uncertainties surrounding the economy and the stock market.
Investors’ interest in this space is evident from the Utilities Select Sector SPDR ETF’s (XLU) 6.5% returns over the past week versus the SPDR S&P 500 Trust ETF’s (SPY) 4.3% returns. The global utility market is expected to grow at a 7.9% CAGR to reach $8.11 trillion by 2026.
Therefore, fundamentally sound and dividend-paying utility stocks Genie Energy Ltd. (GNE), Otter Tail Corporation (OTTR), Vistra Corp. (VST), TransAlta Corporation (TAC), and Hawaiian Electric Industries, Inc. (HE) could be great investments now.
Genie Energy Ltd. (GNE)
GNE supplies electricity and natural gas to residential and small business customers through its Genie Retail Energy (GRE); GRE International (GREI); and Genie Renewables segments internationally. It also provides energy advisory and brokerage services, solar panel manufacturing and distribution, solar installation design, and project management activities.
GNE will pay a $0.16 quarterly cash dividend on August 15, 2022. On July 25, 2022, GNE’s Genie Renewables division announced the formation of Sunlight Energy Investments, which will act as the primary equity financing vehicle for Genie Renewables-originated commercial, community, and utility-scale solar projects and also will participate in projects originated by other solar developers. This will help the company to contribute to the transition to renewable energy.
For its fiscal 2022 first quarter ended March 31, 2022, GNE’s gross profit increased 259.9% year-over-year to $45.54 million. The company’s income from operations came in at $24.43 million for the quarter, versus a loss of $5.47 million in the prior-year period.
Its net income came in at $17.52 million, compared to a loss of $2.36 million in the prior-year period. GNE’s EPS came in at $0.67, versus a $0.09 loss per share in the year-ago period. It had $88.19 million in cash and cash equivalents as of March 31, 2022.
Over the past week, the stock has gained 3.1% to close the last trading session at $9.63.
GNE’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value and a B for Growth, Momentum, Sentiment, and Quality. Click here to see the additional ratings for GNE’s Stability. GNE is ranked #1 of 67 stocks in the Utilities - Domestic industry.
Otter Tail Corporation (OTTR)
OTTR engages in electric utility, manufacturing, and plastic pipe businesses in the United States. The company’s Electric segment focuses on the generation, purchase, transmission, distribution, and sale of electric energy in western Minnesota, eastern North Dakota, and northeastern South Dakota.
OTTR paid a $0.41 quarterly cash dividend on June 15, 2022. The stock pays a $1.65 per share dividend annually, translating to a 2.35% yield. The company’s dividend has grown at a 4.9% rate over the past five years. OTTR has increased its dividends for nine consecutive years.
OTTR’S total operating revenues for its fiscal 2022 first quarter ended March 31, 2022, increased 43.3% year-over-year to $374.90 million. The company’s operating income came in at $98.30 million, up 122.4% from the prior-year period.
Its net income came in at $72 million, representing a 137.4% year-over-year improvement. OTTR’s EPS grew 135.6% from the year-ago period to $1.72. The company had $1.37 million in cash and equivalents as of March 31, 2022.
Analysts expect the company’s EPS to come in at $5.09 for its fiscal 2022 ending December 31, 2022, representing a 20.3% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $1.36 billion for the same fiscal year represents a 13.2% year-over-year improvement. Its EPS is expected to grow at a rate of 9% per annum over the next five years.
Over the past week, the stock has gained 6.7% to close the last trading session at $70.27.
OTTR’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. It has a B grade for Growth, Stability, and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see OTTR’s Value, Sentiment, and Momentum ratings here. OTTR is ranked #4 of 67 stocks in the Utilities - Domestic industry.
Vistra Corp. (VST)
VST operates as an integrated retail electricity and power generation company. It is also involved in electricity generation, wholesale energy purchases and sales, commodity risk management, fuel production, and fuel logistics management activities.
It serves residential, commercial, and industrial customers with a generation capacity of approximately 38,700 megawatts with a portfolio of natural gas, nuclear, coal, solar, and battery energy storage facilities.
VST will pay a $0.18 quarterly cash dividend on September 30, 2022. The stock pays a $0.74 per share dividend annually, translating to a 2.85% yield. The company has increased its dividends for three consecutive years.
On June 7, 2022, VST announced plans to bring its 108-megawatt solar photovoltaic (PV) project Emerald Grove Solar Facility in Crane County, Texas, online and generate electricity for summer.
Together with its existing emission-free generation assets, these projects bring VST’s zero-carbon Vistra Zero portfolio to nearly 3,300 MW online, with plans to grow to more than 7,300 MW by 2026.
As of March 31, 2022, VST had $1.06 billion in cash, cash equivalents, and restricted cash. The consensus EPS estimate of $2.03 for fiscal 2022 ending December 31, 2022, indicates a 175.5% year-over-year improvement.
Analysts expect VST’s revenue to be $16.69 billion for the same fiscal year, representing a 38.2% rise from the prior-year period. Its EPS is expected to grow at a 20.3% rate per annum over the next five years.
Over the past week, the stock has gained 12.4% to close the last trading session at $25.85.
VST’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value and Momentum. Click here to see the additional ratings for VST’s Stability, Sentiment, and Quality. VST is ranked #6 of 67 stocks in the Utilities - Domestic industry.
TransAlta Corporation (TAC)
Based in Canada, TAC owns, operates, and develops a diverse fleet of electrical power generation assets in Canada, the U.S., and Australia. It also engages in wholesale trading of electricity and other energy-related commodities and derivatives and related mining operations and natural gas pipeline operations.
It serves municipalities, medium and large industries, businesses, and utility customers.
TAC will pay a $0.05 quarterly cash dividend on October 1, 2022. The stock pays a $0.16 per share dividend annually, translating to a 1.36% yield. The company’s dividend has grown at a 5.1% rate over the past five years. TAC has increased its dividends for three consecutive years.
For its fiscal 2022 first quarter ended March 31, 2022, TAC’s revenues increased 14.5% year-over-year to $735 million. The company’s gross profit came in at $478 million, indicating a 37.8% year-over-year improvement. Its operating income came in at $300 million for the quarter, representing a 347.8% rise from the year-ago period.
TAC’s net earnings came in at $206 million, up 99.5% from the prior-year period. Its EPS increased 99.5% year-over-year to $0.69. The company had $1.22 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect TAC’s EPS to be $0.65 for fiscal 2022 ending December 31, 2022, representing a 138.9% rise from the prior-year period. The company’s EPS is expected to grow at a 58.7% rate per annum over the next five years.
Over the past week, the stock has gained 1.9% to close the last trading session at $11.42.
TAC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, Sentiment, and Quality. Click here to see the additional ratings for TAC (Stability and Value). TAC is ranked #1 of 52 stocks in the B-rated Utilities - Foreign industry.
Hawaiian Electric Industries, Inc. (HE)
HE engages in the electric utility, banking, and renewable/sustainable infrastructure investment businesses in Hawaii. Its Electric Utility segment provides essential electric service. It serves suburban communities, resorts, U.S. armed forces installations, and agricultural operations.
HE will pay a $0.35 quarterly cash dividend on June 10, 2022. The stock pays a $1.40 per share dividend annually, translating to a 3.31% yield. The company’s dividend has grown at a 2.2% rate over the past five years. HE has increased its dividends for four consecutive years.
For its fiscal 2022 second quarter ended June 30, 2022, HE’s total revenues grew 22.1% year-over-year to $785.07 million. The company’s total operating income came in at $99.28 million, indicating a 1.3% rise from the year-ago period.
While its net income increased 7.4% year-over-year to $69.64 million, its EPS grew 6.8% to $0.63. As of March 31, 2022, the company had $301.70 million in cash and cash equivalents.
The consensus revenue estimate of $3.01 billion for fiscal 2022 ending December 31, 2022, represents a 5.5% rise from the prior-year period. It surpassed the Street EPS estimates in three of the trailing four quarters. Its EPS is expected to grow at a rate of 1.3% per annum over the next five years.
Over the past week, the stock has gained 6.4% to close the last trading session at $42.30.
HE’s POWR Ratings reflect its solid prospects. It has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a B grade for Value, Momentum, Stability, and Sentiment.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for HE’s Growth and Quality here. HE is ranked #3 of 67 stocks in the Utilities - Domestic industry.
GNE shares were trading at $10.00 per share on Monday afternoon, up $0.37 (+3.84%). Year-to-date, GNE has gained 83.62%, versus a -12.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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