13 Safe Haven Utility Stocks for a Punishing Bear Market

Given the market's recent high volatility, investors are finding few safe havens. But several leading investment experts, and contributors to MoneyShow.com, continue to find long-term value in the utility sector. Here's a look at 13 utility sector ideas for conservative, income-oriented investors. Rich Moroney, Dow Theory Forecast Utilities remain one of few pockets of the stock market to hold up in a tumultuous 2022. While the S&P 1500 Index has shed 5% this year, the S&P 1500 utilities sector has slumped 3% -- the fourth best among the index's 11 sectors. With earnings season for the March quarter now largely over, utilities look to build on their momentum. Initial results have been mostly encouraging. So far, utilities are averaging 2% year-to-year growth for earnings per share and 11% for revenue. Utilities have averaged 3% quarterly profit growth and 2% sales growth since 1994. Roughly 65% of utilities topped the consensus for earnings per share and 77% for revenue. In the following paragraphs, we briefly review quarterly results for three members of our Top 15 Utilities portfolio. For the March quarter, American Electric Power grew operating earnings 6% per share to $1.22, squeezing past the consensus by $0.02. American Electric reaffirmed its 2022 guidance, which calls for per-share profits of $4.87 to $5.07, suggesting 2% to 7% growth and straddling the consensus of $4.99. Management targets a long-term growth rate of 6% to 7%. The sale of American Electric's Kentucky operations should close by the end of June; the $2.85 billion deal was announced in October. Entergy saw its adjusted earnings per share fall 10% to $1.32 for the March quarter, missing the consensus by $0.05. The results included an $0.08-per-share benefit from favorable weather conditions. Despite the disappointing quarter, Entergy reaffirmed its full-year guidance, with per-share profits projected to climb 2% to 7%; the consensus calls for 5% growth. Portland General saw March-quarter earnings per share fall 37% to $0.67, missing the consensus by $0.20. The company cut its 2022 profit outlook to a midpoint of $2.575 from $2.825, implying a 5% decline. Management blamed its lower guidance on a ruling by Oregon's utility regulator to reduce deferrals for wildfire restoration and the coronavirus pandemic. Marty Fridson, Forbes/Fridson Income Securities Investor Exelon Corp. is the nation's largest utility holding company, serving more than 10.5 million customers. The company operates in all stages of the energy business -- power generation, transmission, competitive energy sales, and delivery. EXC is recognized as an industry leader, with best-in-class operations. Its credit and business profile have improved with diversification, further helped by the recent spin-off of non-regulated subsidiary Exelon Generation, now operating as Constellation Energy Corp. . The spin-off renders EXC a pure-play regulated utility company. Despite EXC shaving its quarterly dividend by 12% in early 2022 with the spin-off, we continue to recommend the company's common shares for both low- to medium-risk taxable portfolios. Dividends are qualified and taxed at the 15%-20% rate. With this review we are raising our fair value price from $32.00 to $53.00. Pinnacle West Capital Corp. is an electric utility holding company based in Phoenix, AZ. Its primary subsidiary is Arizona Public Service (APS), providing nearly 1.3 million customers with clean energy. APS is also the operator and co-owner of the Palo Verde Generating Station, one of the largest nuclear plants and generators of carbon-free electricity. PNW and APS have negative credit outlooks by both Moody's and S&P. This reflects a shift to less favorable regulatory framework arising from the Arizona Corporation Commission's vote to lower APS's allowed return on equity and possibly disallow cost recoveries. Any negative rating action should be subtle, i.e., just a one-notch downgrade. The company's present dividend is easily covered. Dividends on this investment are qualified and taxed at the more favorable federal rate. PNW's common shares are recommended for low- to medium-risk taxable portfolios. Buy at $83.00 or lower for a 4%+ annualized yield. Harry Domash, Dividend Detective Boring utilities could be the right prescription for this scary market. Utilities are one of the few market sectors showing strength these days. They provide products that everyone needs regardless of which way the economy is heading, namely electricity, water and natural gas. Another advantage of utilities is that many of them pay high dividends. Thus, even if share prices drop, you'll still be collecting substantial income while you wait for the market to recover. With that in mind, I used my favorite stock screener to scan the market for utility stocks worth considering. To begin, I limited the list to U.S.-based utilities, For stocks, the dividend yield (annual dividend divided by price you pay for stock) is analogous to the interest rate you receive on a bank account. As such, I used a dividend yield filter to limit the list to utilities paying high dividends of 3% or more. Most utilities operate relatively stable businesses, in terms of earnings per share. However, I've found that generally, stocks with the fastest earnings growth tend to outperform their category. So, I focused on stocks with 5% EPS growth this yet, next year and for the next five years. I also wanted to follow the smart money and limited the list to utilities in favor with the smart money by specifying Over 80% for Institutional Ownership. Finally, as you've probably already heard, in the stock market, the trend is your friend. So, I used a Performance filter to isolate uptrending utility stocks. My screen turned up four utilities paying 3% plus dividend yields. Evergy delivers electricity to 1.6 million customers in Kansas and Missouri. The dividend yield was recently 3.2%. First Energy serves six million electricity customers in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey and New York, and had a recent 3.3% dividend yield. NRG Energy serves six million electricity customers in Texas, and had a recent 3.3% dividend yield. UGI Corp. delivers propane, liquefied petroleum gases, natural gas and renewable energy products to customers in numerous states and in 17 European countries and also recently offered a 3.8% dividend yield. As always, consider these utilities to be research candidates, not a buy list. The more you know about your stocks, the better your results. Sean Brodrick, Wealth Megatrends Utilities are a favorite of investors who like dividend growth, and I've got a great one that's already mapped out a path for earnings and dividend growth over the next few years, and it may have an upside surprise. Xcel Energy is a utility and regional energy provider serving Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. Its electric power generation runs the gamut, powered by coal, nuclear, natural gas, hydroelectric, solar, oil and a large and growing wind business. Xcel wants to use renewables like wind energy to produce what's called green hydrogen - a fancy term for hydrogen from renewables. By 2030, Xcel expects renewables (and nuclear) to provide about 75% of its power. So, it's on the leading edge of America's energy transition. Meanwhile, its nuclear power segment is doing great. It added four new windfarms for 800 megawatts of new wind power, launched 12 new EV programs and accelerated its timeline to transition out of coal to 2034. The company currently holds close to $22.4 billion in long-term debt. That's up from roughly $11.2 billion in 2013. No big surprise there -- building new energy projects and powerlines takes money. But Xcel can cover its interest payments with cash flow ... and still leave plenty over for a hefty dividend. Going forward, the company expects to maintain between 5% to 7% annual growth in EPS and 8% to 10% annual shareholder returns based on capital gains and dividends. Technically, Xcel Energy is breaking out to the upside. The force index (FI), my favorite momentum indicator, is green. This consolidation took over a year, so it built up a lot of energy for its next move. My target is $97 a share. Nate Pile, Nate's Notes PPL Corp. is an electricity and natural gas distributor operating in Kentucky, Virginia, Pennsylvania, and Rhode Island, and gives us some nice domestic exposure in our line-up of utilities. No, this sort of stock is not likely to ever produce huge gains for us, but, like all utilities, it represents a fairly conservative way to capture a reliable dividend payout while also having a chance at some upside growth as time goes by. PPL is a buy under $30. Public Service Enterprise Group is an energy company that produces energy via a variety of methods, as well as distributes electricity and gas throughout the northeast and mid-Atlantic region of the United States. Since it is a utility, I am not expecting to ever get a whole lot of growth out of the stock; however, it ought to provide a fairly stable dividend stream for us as time goes by. PEG is a buy under $72. Ben Reynolds, Top 10 Dividend Elite UGI Corp. is a gas and electric utility that operates in Pennsylvania, in addition to a large energy distribution business. Its main competitive advantage is its highly diversified model. It has electric and gas utilities, propane distribution that covers a wide geographic area, and a diverse customer base. As a utility, UGI has proven resilient to recessions. It is also attractive for income-oriented investors. The stock is currently offering a 3.8% dividend yield with a wide margin of safety. The company has raised its dividend for 34 consecutive years and has grown its payment at a 6.9% average annual rate over the last decade. Thanks to its healthy payout ratio of 45%, its reliable growth trajectory, and its resilience to recessions, UGI can easily continue raising its dividend meaningfully for many more years. UGI has grown its earnings-per-share in 9 of the last 10 years and has grown its EPS at an average annual rate of 10.9% over the last decade. UGI expects 6% to 10% annual growth of earnings-per-share in the long run. We are forecasting 6.8% annual EPS growth over the next five years. The shares were recently trading at 11.8 times earnings. This valuation multiple is much lower than the historical average of 15.5. We expect the stock to revert to its average valuation level over the next five years. In such a case, the stock would enjoy a 5.7% annualized gain from valuation. When combined with a 6.8% growth rate and the 3.8% dividend yield, expected total returns come to 15.5% per year over the next five years.

13 Safe Haven Utility Stocks for a Punishing Bear Market

Boring utilities could be the right prescription for this scary market and for income-oriented investors.

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