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7 Great Utility Stocks With Big Dividends

Jeff Reeves

Utilities provide power and income.

Utility stocks are some of the most reliable investments on Wall Street. Electricity is a necessity, which guarantees strong baseline demand. And thanks to a highly regulated industry, publicly traded utilities are very close to legalized monopolies with little competition. On the flip side, there's not much growth. It's unlikely a regional electric utility is going to see its revenue double because of a spike in demand or a massive rate increase. However, investors looking for income have a lot to like because many utility stocks pass on a decent portion of their profits to shareholders through stable dividends. Here are seven utilities that offer powerful dividends.

NextEra Energy (ticker: NEE)

NextEra is the largest stock in the U.S. utility sector by market capitalization, with a value now of about $85 billion. It is also one of the sector's best performers in 2018, gaining about 15 percent. Besides providing electricity as a conventional utility, NEE is aggressively investing in wind, solar and nuclear power. And its burgeoning battery storage business helps smooth peak generating periods faced by renewable energy. When compared with some of the other stocks on this list, NextEra's yield may seem a bit low. But its earnings growth also has more potential and could provide an extra source of returns.

Current yield: 2.4 percent

Exelon Corp. (EXC)

Another high flier, Exelon has tacked on more than 10 percent gains in 2018 in addition to its substantial dividend. The $45 billion electric utility is smaller than some on this list, but it's no slouch. Headquartered in Chicago, EXC serves a wide swath of the Northeast from New Jersey to Illinois. Earnings trends have been modestly higher without a one-off event lifting results. That makes investors confident that this is a well-run operation -- and one with reliable income potential no matter what the broader economy throws its way.

Current yield: 3 percent

Duke Energy Corp. (DUK)

Duke is another electric power giant worth a look for dividends. Based in North Carolina, the company has a market capitalization topping $60 billion and serves a large area from Florida through the Carolinas to Kentucky and Tennessee. From electricity generation to natural gas storage and distribution, Duke is diversified. Several years ago, DUK was in the crosshairs thanks to reliance on coal-powered generating plants, however, a more favorable regulatory environment has allowed the stock to stabilize. With nearly a century of uninterrupted dividend payments, income investors can rely on Duke going forward.

Current yield: 4.4 percent

Dominion Energy (D)

Virginia-based Dominion is another diversified utility with a big footprint. It serves about 6 million customers through natural gas and electricity operations, and generates power from sources including hydro, solar, gas, coal and oil. The stock was hit hard during a proposed all-stock merger with South Carolina utility SCANA. Recently, the companies have taken steps toward final approval with offers to freeze rates in the near term. The process is slow, with much red tape and public hearings, but the deal looks to be a boon to long-term investors who can benefit from a massive combined utility with unrivaled stability in the Mid-Atlantic region.

Current yield: 4.6 percent

American Electric Power Co. (AEP)

American Electric Power serves 5 million customers across 11 states, and at $40 billion in market value is another stable and entrenched utility. Short-term earnings rose for this Ohio-based company thanks to hotter than normal weather in the first half of 2018, increasing demand. But it's not just weather to watch as strong management has resulted in a nice run of four consecutive earnings beats. The stock is slightly outperforming the broader S&P 500 index year-to-date as a result, adding a nice mix of share appreciation to its income potential.

Current yield: 3.5 percent

Southern Co. (SO)

SO's stock performance hasn't been as rosy as some other utilities, but that may provide a buying opportunity for investors. Furthermore, current pricing has driven up the company's dividend yield to just north of 5 percent -- well above many peers. Ironically, one of the things working against Southern is its strong performance in 2017, which set expectations a bit too high. A failed "clean coal" project at a Mississippi facility also resulted in a public black eye for the company after it was forced to revert to natural gas generation. However, short-term negativity won't keep this regional powerhouse down for long.

Current yield: 5.1 percent

Sempra Energy (SRE)

Headquartered in San Diego, Sempra is a rare multinational utility company. It provides energy services to more than 40 million customers in Southern California and Texas and in Latin American regions that include Chile and Peru. There's a bit more risk for SRE stock, since South America doesn't have the infrastructure or regulatory certainty of the United States. But Sempra's business is doing quite well in 2018 as measured by revenue and earnings trends, and the diversification across geographies and energy classes should help smooth things out. Sempra also has made big investments in its liquid natural gas business to complement traditional electric power.

Current yield: 3.2 percent

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