4 Top Utility Stocks to Buy Amid Economic Uncertainties
Wall Street has remained volatile for more than two months as domestic and geopolitical tensions continue to make investors jittery. Last week, the Dow, the S&P 500 and the Nasdaq Composite declined 2.1%, 2.5% and 2.6%, respectively.
Rising bond yields and the Federal Reserve’s lack of clarity over its future rate hikes have been leading to huge selloffs. This has seen consumer confidence and sentiment both sharply declining over the past few months. Given this uncertain scenario, investing in defensive stocks like Vistra Corp. VST, NiSource Inc. NI, Consolidated Edison, Inc. ED and Consolidated Water Co. Ltd. CWCO would be a wise decision.
Consumer Confidence Dips
The consumer confidence index fell to 102.6 in October from the upwardly revised 104.3 in September, recording its third straight month of decline, the Conference Board said on Oct 31. However, it was slightly above the consensus estimate of a drop to 100.
Investors' confidence in high-risk assets such as equities has been significantly dented owing to a sharp rise in yields of U.S. government bonds, apprehensions about an imminent recession, and escalating geopolitical tensions in the Middle East.
Moreover, inflation, despite the Federal Reserve’s aggressive interest rate hikes, remains stubbornly high. The Federal Reserve has increased interest rates by 525 basis points since March 2022. This has led to a significant decline in inflation from its peak of 9.1% in June 2022.
However, inflation remains elevated and a lot higher than the central bank’s 2% target. This has left the Fed undecided on when to end its monetary tightening campaign. Federal Reserve Chairman Jerome Powell hinted at another 25-basis point interest rate hike this year.
Also, the Fed has downwardly revised its interest rate cut from four to two in 2024, which means higher interest rates are going to stay for a longer period.
The uncertainty over the Fed’s future course of action has seen investors scrambling for direction. This saw the 10-year Treasury yield jumping to almost 5% earlier this month.
Moreover, geopolitical tension arising out of the recent Israel-Hamas conflict in the Middle East has further ignited fears of a slowing global economy.
The U.S. Gross Domestic Product (GDP) expanded a robust 4.9% in the third quarter, exceeding the consensus estimate of a 4.7% increase, as reported by the Commerce Department on Oct 26. Despite that, it did not positively impact the markets.
Our Choices
We have thus narrowed our search to four stocks from the utilities sector. Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vistra Corp. is an energy company. VST offers electricity and power generation, distribution and transmission solutions. Vistra Energy Corp. is based in Dallas.
Vistra Energy has an expected earnings growth rate of 220.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 13.8% over the last 60 days. VST presently has a Zacks Rank 2. Vistra Energy has a beta of 0.94 and a current dividend yield of 2.53%.
NiSource Inc., together with its subsidiaries, provides natural gas, electricity and other products and services in the United States. NI’s operating subsidiaries deliver energy to roughly 3.7 million customers in six states — Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Indiana. NiSource has one of the nation’s largest natural gas distribution networks, as measured by a number of customers.
NiSource has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. NI presently has a Zacks Rank #2. NiSource has a beta of 0.49 and a current dividend yield of 3.98%.
Consolidated Edison, Inc. is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York (CECONY), Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edisonhas an expected earnings growth rate of 7.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. ED presently has a Zacks Rank #2. Consolidated Edisonhas a beta of 0.38 and a current dividend yield of 3.70%.
Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.
Consolidated Water Co. has an expected earnings growth rate of 174.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the last 60 days. CWCO presently carries a Zacks Rank #2. Consolidated Water has a beta of 0.17 and a current dividend yield of 1.31%.
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NiSource, Inc (NI) : Free Stock Analysis Report
Consolidated Edison Inc (ED) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
Vistra Corp. (VST) : Free Stock Analysis Report
