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Sizzling! Nine Utility Stocks with Momentum

Utilities have been the best performing sector so far in 2016, gaining an average of 18.2%—not too shabby!

Steady electricity price gains, rising demand, an improving employment climate and increasing wages have driven utility prices up this year. And investors looking for ‘safe havens’—strong companies with healthy dividend payments—have flocked to the utility industry.

A Few More Reasons to Like Utilities

Consequently, many utility stocks are trading at—or close to—their 52-week highs. Yet, most industry analysts believe the best is yet to come for the sector due to:

A greater number of traditional utility companies are jumping on the environmentally friendly power generation bandwagon. In fact, renewables used in the electric power sector are projected to rise by 11.3% in 2016 and 4.4% in 2017, according to the Energy Information Administration (EIA). That same entity says that hydropower generation will rise by 9.1% this year, and generation from renewables (ex- hydropower) will increase 13.3% this year and 8.6% in 2017.

Favorable government initiatives like the Solar Energy Investment Tax Credit and Wind Energy Production Tax Credit will spur innovation.

New avenues for revenue growth. In a survey titled, State of the Utility Industry, it was reported that utilities were increasing their bottom lines by expanding their services including offering energy management and efficiency services, deploying electric vehicle charging infrastructure, and offering micro grids-as-a-service to customers.

Increasing dividend payments. In the first quarter of this year, 23 utility companies in the S&P 500 hiked their dividends.

A vibrant M&A climate, offering opportunities for investors to see immediate appreciation and steady dividends. There were 53 utility deals in the first quarter, including Exelon’s $6.8 billion purchase of Pepco Holdings and Dominion Resources agreement to acquire Questar for $4.4 billion.

Certainly, the specter of rising interest rates could dampen enthusiasm for the industry because higher rates would mean more money would need to be spent on the huge debt burden the sector carries. But it doesn’t look like the Federal Reserve is in a hurry to boost rates. As well, continued uncertainty around the globe, including the Chinese economy, Brexit, the upcoming U.S. Presidential election and continued terrorist attacks, drive investors into defensive stocks like utilities.

Utility Stocks on the Move

With that in mind, I ran a screen of utility companies with increasing forecasted earnings over the next five years, a recent rise in institutional buying, and whose shares are rated ‘Buy’ or better by Wall Street analysts. I then looked at their momentum, and how technical analysts viewed the companies—in the short- and medium-term.

These nine companies were the result of that research. They are each trading near their yearly highs, but analysts believe they still have lots of room to grow. They all pay decent—not outrageous—dividends, giving investors an opportunity to reap appreciation as well as cash flow.

We’ve recently recommended three of the nine—NEE, LNT and WEC—in Wall Street’s Best Dividend Stocks, citing their growth initiatives and bottom-line potential.

But, as always, please dig in and find out if these companies are the right fit for your personal strategies and goals—before jumping in.

energy stock chart

Happy investing,

Nancy Zambell
Editor, Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks


Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.