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10 Utilities Stocks with Over 3% Dividend Yield

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·11 min read
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In this article, we will be looking at 10 utilities stocks with over 3% yield. To skip our detailed analysis of utility stocks, you can go directly to see the 5 Utilities Stocks with Over 3% Yield.

In the midst of a prolonged economic recession and threats of rising inflation and interest rates, investor circles and the stock market at large have been prone to rising uncertainty and insecurity. Throughout this all, the utilities sector with stocks such as NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK) among others, leading the fray, has slowly but surely been becoming an investment option investors are growing more fond of. This is particularly the case as investors begin to consider the utilities sector as an attractive and profitable alternative to bonds.

According to a Reuters report, this sentiment is backed up by increasingly positive performance on the part of utilities stocks. For instance, the S&P 500 utilities index as of this March was able to outperform the market at large, with gains of about 9.3% as compared to the benchmark S&P 500's mere 4.3% gain during the same month. Some professionals have been noted to comment that this outperformance of utilities stocks may be attributed to their tendency to naturally perform better during economic downturns, as these stocks are more likely to pay dividends and are more stable than others.

Joseph Quinlan, who is the head of CIO market strategy at Merrill and Bank of America Private Bank based in New York, has been reported to comment that investing in utilities then becomes a "defensive positioning" for investors looking to hedge against a downturn. For those in the market looking to stay safe but still remain part of the market at the same time, the utilities sector thus ends up becoming an attractive investment opportunity.

The above statements have also been backed up by an Edward Jones report on the utilities sector, published this August. According to this report, the sector itself has historically proven to be an integral portion of stable investment portfolios, for the sheer fact that utilities stocks tend to pay high percentages in dividends, and have also historically been known to steadily grow their dividends over time. This consistent and steadily growing passive income stream thus helps investors pouring money into utilities stocks hedge against inflation and reduce its impact on their financial standing. On the bit about the utilities sector also acting as a defensive position for investors wanting to remain in the market, albeit safely, the report has also mentioned that utilities stocks tend to offer just this sort of positioning. After all, the companies making up this sector are typically among the few that are little affected by economic volatility and downturns. Based on all of the above, the Edward Jones report has mentioned a recommended equity weight for utilities in investor portfolios as well, which stands at 4%.

While the utilities sector is proving to be a good counter to rising economic uncertainty and inflation, the entire hedge fund industry is still feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

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Let's now look at the 10 utilities stocks with over 3% yield.

Our Methodology

Insider Monkey tracks the data of about 866 hedge funds, which we have used to pick utility stocks that are popular among hedge funds today. The stocks selected are also all part of the Russell 2000 Index, and are thus small-cap stocks. Their dividend yields and hedge fund holders have been mentioned below, with the stocks being ranked from the lowest to the highest yield. Finally, we have taken care to include stocks with mostly positive analysts' ratings and strong fundamentals as well.

Utilities Stocks with Over 3% Yield

10. Southwest Gas Holdings, Inc. (NYSE: SWX)

Number of Hedge Fund Holders: 23 Dividend Yield: 3.3%

Southwest Gas Holdings, Inc. (NYSE: SWX) is a purchaser, distributor, and transporter of natural gas in Arizona, Nevada, and California. The company ranks 10th on our list of utilities stocks with Over 3% Yield. It operates through its Natural Gas Operations and Utility Infrastructure Services segments.

This June, Julien Dumoulin-Smith, an analyst at BofA, upgraded shares of Southwest Gas Holdings, Inc. (NYSE: SWX) from Underperform to Neutral. The analyst also placed a $69 price target on the stock.

In the second quarter of 2021, Southwest Gas Holdings, Inc. (NYSE: SWX) had an EPS of $0.43, missing estimates by $0.04. The company’s revenue was $292.80 million, up 11.57% year over year and beating estimates by $2.19 million. Southwest Gas Holdings, Inc. (NYSE: SWX) has gained 14.77% in the past 6 months and 20.41% year to date.

By the end of the first quarter of 2021, 23 hedge funds out of the 866 tracked by Insider Monkey held stakes in Southwest Gas Holdings, Inc. (NYSE: SWX) worth roughly $159 million. This is compared to 17 hedge funds in the previous quarter with a total stake value of approximately $80.8 million.

Like NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK), Southwest Gas Holdings, Inc. (NYSE: SWX) is a good stock to invest in.

9. Portland General Electric Company (NYSE: POR)

Number of Hedge Fund Holders: 21 Dividend Yield: 3.4%

Portland General Electric Company (NYSE: POR) is an integrated electric utility company and ranks 9th on our list of utilities stocks with over 3% yield. The company generates, purchases, transmits, distributes, and retails electricity in Oregon. It operates six thermal plants, seven hydroelectric plants, and three wind farms.

Paul Fremont, an analyst at Mizuho, just this June raised the price target on shares of Portland General Electric Company (NYSE: POR) from $41 to $51, a $10 jump. The analyst also currently holds a Neutral rating on the stock.

In the second quarter of 2021, Portland General Electric Company (NYSE: POR) had an EPS of $0.36, in line with estimates. The company’s revenue was $537 million, up 14.5% year over year and beating estimates by $52.99 million. Portland General Electric Company (NYSE: POR) has gained 20.61% in the past 6 months and 21.69% year to date.

By the end of the first quarter of 2021, 21 hedge funds out of the 866 tracked by Insider Monkey held stakes in Portland General Electric Company (NYSE: POR) worth roughly $68.5 million. This is compared to 19 hedge funds in the previous quarter with a total stake value of approximately $105 million.

Like NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK), Portland General Electric Company (NYSE: POR) is a good stock to invest in.

8. New Jersey Resources Corporation (NYSE: NJR)

Number of Hedge Fund Holders: 12 Dividend Yield: 3.5%

New Jersey Resources Corporation (NYSE: NJR) is an energy services holding company that offers regulated gas distribution and retail and wholesale energy services. The company ranks 8th on our list of utilities stocks with over 3% yield and operates through its Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation segments.

Gabriel Moreen, a Mizuho analyst, holds a Buy rating on shares of New Jersey Resources Corporation (NYSE: NJR) as of this May. The analyst also raised his price target on the stock at the same time, with the new target being $45.

In the fiscal third quarter of 2021, New Jersey Resources Corporation (NYSE: NJR) had an EPS of -$0.15, missing estimates by $0.03. The company’s revenue was $367.59 million, up 22.95% year over year and also missing estimates by $3.94 million. New Jersey Resources Corporation (NYSE: NJR) has gained 1.77% in the past 6 months and 11.60% year to date.

By the end of the first quarter of 2021, 12 hedge funds out of the 866 tracked by Insider Monkey held stakes in New Jersey Resources Corporation (NYSE: NJR) worth roughly $26.8 million. This is compared to 13 hedge funds in the previous quarter with a total stake value of approximately $36 million.

Like NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK), New Jersey Resources Corporation (NYSE: NJR) is a good stock to invest in.

7. ALLETE, Inc. (NYSE: ALE)

Number of Hedge Fund Holders: 16 Dividend Yield: 3.5%

ALLETE, Inc. (NYSE: ALE), an energy company operating through its Regulated Operations, ALLETE Clean Energy, and Corporate and Other segments, ranks 7th on our list of utilities stocks with over 3% yield. The company also offers regulated utility electric services in Wisconsin, serving about 15,000 electricity customers, 13,000 natural gas customers, and 10,000 water customers. It also serves customers in Minnesota.

This March, Paul Fremont at Mizuho raised his price target on shares of ALLETE, Inc. (NYSE: ALE) from $55 to $62, while reiterating a Neutral rating on the stock as well.

In the second quarter of 2021, ALLETE, Inc. (NYSE: ALE) had an EPS of $0.53, beating estimates by $0.01. The company’s revenue was $335.6 million, up 37.99% year over year and beating estimates by $52.7 million. ALLETE, Inc. (NYSE: ALE) has gained 9,75% in the past 6 months and 16.33% year to date.

By the end of the first quarter of 2021, 16 hedge funds out of the 866 tracked by Insider Monkey held stakes in ALLETE, Inc. (NYSE: ALE) worth roughly $94.2 million. This is compared to 11 hedge funds in the previous quarter with a total stake value of approximately $90 million.

Like NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK), ALLETE, Inc. (NYSE: ALE) is a good stock to invest in.

6. Spire Inc. (NYSE: SR)

Number of Hedge Fund Holders: 9 Dividend Yield: 3.6%

Spire Inc. (NYSE: SR) is a purchaser, retail distributor, and seller of natural gas to residential, commercial, industrial, and other end-users in the US. The company ranks 6th on our list of utilities stocks with over 3% yield and operates through its Gas Utility and Gas Marketing segments.

As of this June, Morgan Stanley has retained its Equal Weight rating on shares of Spire Inc. (NYSE: SR). Additionally, the firm also holds an $84 price target on the stock, with analyst Stephen Byrd covering Spire Inc. (NYSE: SR).

In the fiscal third quarter of 2021, Spire Inc. (NYSE: SR) had an EPS of $0.06, beating estimates by $0.03. The company’s revenue was $327.8 million, up 2.09% year over year and beating estimates by $3.02 million. Spire Inc. (NYSE: SR) has gained 10.45% in the past 6 months and 12.88% year to date.

By the end of the first quarter of 2021, 9 hedge funds out of the 866 tracked by Insider Monkey held stakes in Spire Inc. (NYSE: SR) worth roughly $20.9 million. This is compared to 15 hedge funds in the previous quarter with a total stake value of approximately $35.1 million.

Like NextEra Energy, Inc. (NYSE: NEE), The AES Corporation (NYSE: AES), NRG Energy, Inc. (NYSE: NRG), and American Water Works Company, Inc. (NYSE: AWK), Spire Inc. (NYSE: SR) is a good stock to invest in.

Click to continue reading and see the 5 Utilities Stocks with Over 3% Yield.

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Disclosure: None. 10 Utilities Stocks with Over 3% Yield is originally published on Insider Monkey.