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4 Utilities That Crossed the S&P 500 Mark in 1H19

Zacks Equity Research

In the first six months of 2019, the dominant issue in the financial space has been the trade war between the United States and China. Though President Trump and his Chinese counterpart Xi Jingping have agreed to resume trade talks, the ongoing market volatility is spooking investors.

The forecast for U.S. GDP growth rates after the Federal Open Market Committee meeting held on Jun 19 paints a tougher picture for the U.S. economy. The committee projects a decline in U.S. GDP from 2.9% at the end of 2018 to 2.1% in 2019, 2% in 2020 and 1.8% in 2021.

Stable Investment Option

In such a tumultuous scenario, investors may look out for safe-haven stocks which assure steady returns. Utilities is one such sector, which provides basic electric, water and gas services, and is guarded against ups and downs in an economy. In the past 12 months, the sector has returned 9.6%, outperforming the Zacks S&P 500 composite’s return of 7.3%.

Moreover, fed officials kept the 2019 interest rate at 2.4%, unchanged from its March FOMC meeting. Interest rate projection for 2020 and 2021 has been revised down. The rate is now projected at 2.1%, down from 2.6% for 2020, and 2.4% versus 2.6% expected earlier for 2021.

Stable earnings and cash flow allow utilities to reward shareholders with regular dividends and share buybacks. This makes the defensive domestic-focused utility stocks quite attractive. Currently, the sector’s dividend yield is 2.59%, better than the S&P 500 composite’s 1.88%. Our weekly Earnings Outlook report calls for earnings growth of 2.6% on 2.5% revenue growth.

Our Picks

Markets are likely to remain edgy for now, making stable sectors like Utilities all the more appealing. We have picked a few stocks from the sector with a Zacks Rank #2 (Buy) which have returned more than the Zacks S&P 500 composite’s 16% in the first six months of 2019. These companies’ dividend yield is better than the S&P 500 composite as well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Xcel Energy Inc. XEL: Minneapolis, MN-based Xcel Energy, with subsidiaries, is engaged primarily in electric and natural gas operations.

6th Months Return =25.7%,

Dividend Yield =2.67%

Long-Term Growth = 5.60%

Estimates Movement =The Zacks Consensus Estimate for 2019 earnings has moved up 0.4% to $2.62 in the past 60 days.

ONEOK, Inc. OKE: Tulsa, OK-based ONEOK is an energy company engaged in natural gas and natural gas liquids (NGL) businesses.

6th Months Return =21.7%

Dividend Yield =4.93%

Long-Term Growth = 11.30%

Estimate Movement =The Zacks Consensus Estimate for 2019 earnings has risen 0.3% to $3.07 in the past 60 days

Hawaiian Electric Industries, Inc.HE: Honolulu-based Hawaiian Electric through its subsidiaries engages in electric utility and banking businesses, primarily in the state of Hawaii.

6th Months Return =24.4%

Dividend Yield =2.89%

Long-Term Growth = 5.60%

Estimate Movement =The Zacks Consensus Estimate for 2019 earnings has climbed 0.5% to $1.95 in the past 60 days.

DTE Energy Company DTE : Detroit, MI-based DTE Energy, with subsidiaries, is engaged in regulated and unregulated energy businesses.

6th Months Return =19.5%

Dividend Yield =2.88%

Long-Term Growth = 6%

Estimate Movement =The Zacks Consensus Estimate for 2019 earnings has moved up 0.3% to $6.22 in the past 60 days.

Focus on Innovation

Most utility companies are mature with extensive infrastructure. To deliver safe and clean services, these facilities require regular maintenance and upgrade. Thus, funding is an important factor. The aforementioned utility companies are also investing in research and development on a regular basis to maintain services. Xcel Energy’s capital investments are directed toward transmission, distribution, electric generation and renewable projects.

The company is well positioned to deliver 2019 earnings per share in the range of $2.55-$2.65 with 5-7% earnings growth. ONEOK expects total growth capital expenditures in the range of $2,500-$3,700 million for 2019. In the 2020-2021 period, Hawaiian Electric plans to invest $400-$500 million annually and approximately $400 million in 2019. Meanwhile, DTE Electric intends to make capital investments of $11.3 billion between 2019 and 2023.

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Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report
 
DTE Energy Company (DTE) : Free Stock Analysis Report
 
Xcel Energy Inc. (XEL) : Free Stock Analysis Report
 
ONEOK, Inc. (OKE) : Free Stock Analysis Report
 
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