Winter is back with a vengeance this year dropping snow, ice and freezing temperatures into sections of the southwest with that typically bask in warm weather.
As a result, energy stocks have rallied on the spike in oil and gas prices across the country but could easily retrace as weather moderates and supply catches up with demand. Remember … we are still in a depressed “travel market” due to the pandemic.
Instead, consider utility stocks. Utilities are a solid option by many, given that they provide essential products and services like gas, light and electricity. The popularity of this commodity means that they tend to outperform the market in periods of distress.
Not only do utility stocks offer investors slow and steady growth, but they also deliver a healthy dividend yield. If you are looking to add one or two high-yield dividend payers to your portfolio, here are 3 utility stocks to keep you warm with cash this winter.
Southern Company (SO)
In today’s volatile market conditions, the utility giant, Southern Company has proven to be a safe bet. The investment is an appealing buy for income-focused investors for its dividend yield of 4.18%. Moreover, Southern Company has an excellent track record with dividend increases in 19 consecutive years. The low-risk, stable dividend quality of utility stocks like this one is a major reason why they are increasingly favored in a volatile economy.
In addition to an attractive yield, Southern Company also boasts a diverse business model with operations in gas storage, gas pipelines and distribution of electrical power. The company has a presence in three growth states of Georgia, Tennessee and Virginia. As the world moves towards clean energy, Southern Company is shifting its focus away from traditional utility production and moving towards renewable energy like wind and solar. Utilities are a commodity that remains largely unaffected by changes in the markets, enabling Southern Company to thrive in the corona-economy.
Southern Company had a strong dividend growth in the last few years and doesn’t look like it’s about to break its streak any time soon. As a utility stock that can sustain dividend payouts in both good times and bad, Southern Company is a great investment for a diverse portfolio.
Duke Energy (DUK)
A non-cyclical stock that is fairly immune to the effects of the pandemic is Duke Energy. The company is the largest regulated utility firm in North America with 1.6 natural gas customers and 7.7 million energy customers across 7 states. With the rise of green energy sources, the company is making the pivot away from its legacy coal plants and towards renewable energy.
Given that Duke Energy operates in an industry with stable demand, the utility stock does not have high growth levels. However, it is a great investment for risk-averse investors who are looking for a stable dividend income. The stock’s beta value is just 0.23 in the last five years, implying low levels of volatility.
In addition to its stable business, Duke Energy also offers a high dividend yield of 4.1% with dividend increases in the last nine years. This stock offers investors a return regardless of the stock’s performance. However, this comes at the cost of sacrificing growth for stability. If you are looking for a safe investment that offers consistent income, Duke Energy stock is a great buy.
Dominion Energy (D)
Another big player in the utility space is Dominion Energy. Like the other stocks in this article, the company is considered to be a safe play for its high dividend and stable growth. The utility giant offers a number of different services including the production and transportation of energy, electrical generation, transmission and distribution as well as natural gas pipelines and underground storage. Dominion Energy has a presence in Virginia, North and South Carolina.
While many companies have taken a hit to their bottom line during the pandemic, the same cannot be said for Dominion. The company outperformed the industry with a 5% gain year-to-date with room to go higher. It is considered to be a “pure-play” utility stock. Adding to its stellar performance this year, Dominion also maintains a strong annual dividend yield of 3.17%.
Warrant Buffet, the Oracle of Omaha is also bullish on this stock. In the midst of a pandemic, Berkshire Hathaway closed one of its biggest deals with the acquisition of Dominion Energy for $8 billion. The agreement was finalized with $2.7 billion paid in cash and $5.3 billion in debt. As more people spend time indoors, the increased energy costs will do wonders for Dominion’s bottom line. If you are looking for a safe haven investment during these rough times, this utility stock is well worth your time.