The Best Dividend Stocks in the Utility Sector

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Utility stocks may not always make most exciting investments, but during a questionable market, this industry can be a great choice for investors seeking a more defensive approach. When the market goes south, investors flock to the safest industries. That is, the industries that are less impacted by a weak economy. The stocks of most utility companies pay higher dividends than most other stocks.  As with the consumer staples and healthcare sectors, utility stocks also provide diversification against an investor’s holdings in other more cyclical sectors (i.e. energy, materials).  During slow economic periods or a recession, electricity and water are in constant need, thus providing a steady stream of earnings for utility companies. The sector, as measured by the Utilities Select Sector SPDR® (XLU) is up 10.74% for the year.  This is primarily due to positive earnings and weaker than expected economic growth. Another critical element that has made utilities a strong performer in 2016 has been that nearly every U.S. utility company is not impacted by the rising dollar.

Here is the performance for all the stocks within the XLU fund year-to-date;

Company Name Index Weight YTD Change %
American Water Works Co Inc 2.15% 21.32%
Centerpoint Energy Inc 1.61% 20.42%
AES Corp 1.27% 19.75%
Edison Intl 3.86% 19.41%
NextEra Energy Inc 9.64% 19.05%
Alliant Energy Corp 1.40% 18.43%
Exelon Corp 5.03% 17.75%
SCANA Corp 1.69% 17.54%
DTE Energy Co 2.82% 16.20%
Pinnacle West Capital (AZ) 1.41% 15.56%
Consolidated Edison Inc 3.77% 14.86%
PG&E Corporation 5.04% 13.29%
CMS Energy Corp 1.94% 13.28%
Nisource Inc 1.21% 13.22%
WEC Energy Group Inc 3.05% 13.00%
Xcel Energy Inc 3.46% 12.67%
Ameren Corp 1.99% 12.54%
Dominion Resources Inc 7.73% 9.55%
Duke Energy Corp 8.27% 9.26%
American Electric Power 5.16% 7.45%
Southern Co 8.19% 7.27%
Sempra Energy 4.16% 5.69%
Public Service Enterprise Grp 3.44% 5.45%
FirstEnergy Corp 2.37% 5.14%
Eversource Energy 2.83% 4.64%
Entergy Corp 2.13% 4.48%
PPL Corp 3.85% -0.64%

By considering these utility stocks as part of a diversified portfolio, investors are potentially able to shield themselves from the brunt of a future market decline and collect a steady dividend income. Below are our five highest ranking utility stocks for dividend investors. Our ranking system examines five key criteria in selecting the best candidates in each sector including dividend yield, dividend growth, financial strength, beta, and relative valuation (P/E, P/S, P/B, or P/FFO). Our Top 100 Dividend Stocks list includes several utility stocks with high dividends. These are the favored five;

Dominion Resources, Inc. (D) offers a dividend yield of 3.8% and has been boosting its quarterly payout every year since 2009. The energy producer released its quarterly financial results on Monday, indicating a strong quarter fueled by higher demand. Dominion announced a new quarterly dividend of $0.70 in January, an 8 percent increase from the prior rate of $0.6475 per share. Dominion continues to provide excellent dividend increases for utility investors. The company pays a quarterly dividend, typically in March, June, September and December.

Dominion ranks #53 and placed #1 within the utility sector.

Southern Company (SO) has a dividend yield of nearly 4.5% and has been increasing its dividend annually every year since 2002. The utility firm announced a regular quarterly dividend of $0.56, a 3 percent increase from the prior rate of $0.5425 per share in April of 2016. The company recent completed its merger with AGL Resources, which makes it the second largest utility company in the United States. The higher ranking also reflects Southern’s consistency of earnings and low beta. Investors of Southern Company receive dividend payments quarterly, in March, June, September and December.

Southern Company ranks #67.

CMS Energy Corporation (CMS) has a current dividend yield of about 3% and has been increasing its dividend every year since 2012. CMS is an energy company, which focuses on providing services primarily in Michigan. The utility firm announced a regular quarterly dividend of $0.29 per share in January, a 7 percent increase from the prior rate of $0.27 per share. If the company continues to raise its dividend at this pace, it is likely that its next dividend raise in 2017 will continue higher. The company pays its quarterly dividends in February, May, August and November.

CMS Energy ranks #74.

Consolidated Edison, Inc. (ED) has a dividend yield of about 3.6% and has been continuously raising its dividend for 41 years, since 1975. The company is an energy provider in the New York City area and is a favorite among dividend investors. ED announced a regular quarterly dividend of $0.67 per share, a 3 percent increase from the prior rate of $0.65 per share earlier this year. It is most likely that its next dividend declaration will be in the low single digit increase range. ConEd typically pays its dividends in February, May, August and November.

ConEd ranks #79.

Duke Energy Corp (DUK) offers a dividend yield of about 4.4% and has been boosting its dividend payout every year since 2007. Duke announced a regular quarterly dividend of $0.855, a 4 percent increase from the prior rate of $0.825 per share. The company completed the acquisition of North Carolina-based, Piedmont Natural Gas, last month which will help it expand its exposure to natural gas. The company pays its dividends in March, June, September and December.

Duke Energy ranks #89 list

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