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The utilities sector is made up of companies that provide electricity, natural gas, water, sewage, and other services to homes and businesses. Many of these companies are heavily regulated. They include major utilities companies such as Dominion Energy Inc. (D), Duke Energy Corp. (DUK), and Xcel Energy Inc. (XEL).
Utilities stocks, as represented by the Utilities Select Sector SPDR ETF (XLU), an exchange-traded fund, have underperformed the broader market over the past year. XLU has provided a total return of 8.9% over the past 12 months, compared with the Russell 1000 Index’s total return of 30.4%. These market performance numbers and all statistics in the tables below are as of Nov. 24, 2021.
Here are the top three utilities stocks with the best value, fastest growth, and most momentum.
Best Value Utilities Stocks
These are the utilities stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
Source: YCharts
- NRG Energy Inc.: NRG Energy owns and operates power-generating facilities, primarily in the United States. The company provides energy production, cogeneration facilities, thermal energy production, and resource recovery facilities and services. For Q3 2021, ended Sept. 30, NET income rose more than six-fold on a more than two-fold rise in total operating revenues (YOY). NRG attributed the growth to its acquisition of Direct Energy and mark-to-market hedge positions driven by large movements in gas and power prices.
- UGI Corp.: UGI is a domestic and international distributor of energy products and services. It offers propane, natural gas, and electricity. Net income attributable to UGI for Q4 FY 2021 ended Sept. 30, was $525 million, significantly up from $9 million for the prior-year quarter. Total revenues climbed by 27.9% over the same period. UGI reported record net income and diluted EPS for FY 2021, which the company attributed to the acquisition of Mountaineer Gas Company, its new partnerships for its Midstream & Marketing business, and improved weather resiliency across the company.
- Pinnacle West Capital Corp.: Pinnacle West Capital is a utility holding company. Through a subsidiary, the company offers retail and wholesale electric services throughout the state of Arizona. The company is also involved in real estate development activities.
These are the top utilities stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
Source: YCharts
- NRG Energy Inc.: See company description above.
- CenterPoint Energy Inc.: CenterPoint Energy is a public utility holding company. Through subsidiaries, CenterPoint provides electricity transmission and distribution, interstate pipeline operations, natural gas distribution, and power generation, among other related services.
- Exelon Corp.: Exelon is a utility services holding company. It distributes electricity to customers in Illinois and Pennsylvania through subsidiaries, distributes gas in the Philadelphia area, and operates nuclear power plants in several states. On Oct. 29, the company announced a quarterly dividend of $0.3825 per share of common stock. The dividend is payable Dec. 10 to shareholders of record as of Nov. 15, 2021.
These are the utilities stocks that had the highest total return over the last 12 months.
Source: YCharts
- FirstEnergy Corp.: FirstEnergy is a public utility holding company that, through subsidiaries, generates, transmits, and distributes electricity. The company also provides natural gas, energy management, and related services. FirstEnergy in July was forced to pay a $230 million fine for its involvement in a bribery scheme In November, consumer advocates in Ohio asked the state’s utility regulatory board to reopen an audit of the company to find if the source of the money used in the bribery scheme came from the company’s customers.
- Exelon Corp.: See company description above.
- UGI Corp.: See company description above.
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