Except for people living off the grid, everyone uses utilities. Electricity to light their homes, gas for heat, and everyone needs running water. That’s why utilities stocks are usually a pretty safe bet, particularly as winter comes and people nudge their thermostats a little higher.
I suggest utilities stocks for investors who don’t have a great risk tolerance because you can count on them for dependable returns. Although you won’t see the world-beating returns you’ll get from the best growth stocks.
In addition, many utility companies are regulated monopolies, so you’re assured of a decent return, but government regulators won’t let the companies set super-high rates to inflate profits.
Instead, utilities stocks are more of a defensive play. When the market gets volatile, or the economy begins to wobble, investors can usually find safety in the utilities sector.
But even when the market is humming along, there are some reasons to appreciate utilities. These stocks typically provide a decent dividend. And there’s always something satisfying about investing in a company that pays you back.
Here are several from which to choose.
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Oneok (NYSE:OKE) is a natural gas supplier in Tulsa, Oklahoma. It connects the natural gas liquid supply in the Rocky Mountain, mid-continent and Permian regions with customers.
Its assets, which stretch as far north as North Dakota and to the Gulf of Mexico, use a network of 40,000 miles of pipelines.
The calls for Magellan shareholders to receive $25 and 0.667 shares of OKE stock for each share of MMP stock. The deal should close later this year, giving Oneok another revenue stream and an opportunity to reduce redundancies.
Investors are on board. Oneok stock is up 13% since the merger announcement. As a bonus, Oneok is one of the better dividend stocks on the New York Stock Exchange, providing a yield of nearly 6%.
OKE stock has a “B” rating in the Portfolio Grader.
Energy Transfer (ET)
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Energy Transfer (NYSE:ET) is also in the business of transporting natural gas and propane.
The Dallas-based company has nearly 125,000 miles of pipelines and energy infrastructure across 41 U.S. states.
The company is a major player responsible for transporting about 30% of the nation’s oil and natural gas.
It’s also in acquisition mode. Energy Transfer announced a deal to buy Crestwood Equity Partners (NYSE:CEQP), a master limited partnership with midstream assets in the Powder River Basin, Williston Basin and Delaware Basin, for $7.1 billion.
Crestwood has 143 wells, including 73 connected in the last quarter, so its assets will be an excellent addition to ET.
Energy Transfer had revenue of $18.32 billion in the second quarter and topped EPS estimates by posting 26 cents per share. But its revenue was down nearly 30% from a year ago as commodity prices fell.
However, ET should bring home consistent, if not overwhelming, profits. And that’s what you want from utilities stocks. ET has a “B” rating in the Portfolio Grader.
Williams Companies (WMB)
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Also based in Tulsa, Williams Companies (NYSE:WMB) is involved in natural gas processing and transportation.
Its footprint goes from coast to coast, with pipelines and operations connecting Washington state to New York state.
It claims to handle 30% of natural gas production in the U.S. and has a network of 30,000 miles of pipeline covering 25 states.
For Williams, stability and security are the name of the game. The company has paid a quarterly dividend for nearly 50 years, with a yield currently that’s better than 5%. It also has a streak of 26 consecutive quarters, beating analysts’ EBITDA estimates.
WMB stock is up 5% this year and has a “B” rating in the Portfolio Grader.
Enterprise Products Partners (EPD)
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Enterprise Products Partners (NYSE:EPD) is a master limited partnership based in Houston. As a master limited partnership, ownership shares of EPD trade publicly like a stock.
Investors realize increased dividend payouts and reduced taxes because of the MLP’s unique tax structure; the corporation pays taxes on earnings before sharing the windfall with investors.
That makes MLPs a reliable choice for income investors and a safe investment. Enterprise Products Partners is diversified, operating in natural gas liquids, crude oil, natural gas and petrochemicals. It has more than 50,000 miles of pipeline.
Earnings in the second quarter included $1.3 billion, or 57 cents per share. Enterprise increased its dividend by 5.3% to 50 cents per share, giving it a dividend yield of 7.6%.
EPD earned a “B” rating in the Portfolio Grader.
Fluence Energy (FLNC)
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Fluence Energy (NASDAQ:FLNC) is in the clean energy business. The Virginia company operates in the energy storage products and services space and provides cloud-based software for renewables and storage.
AI powers the company’s Fluence IQ Platform, which provides software-as-a-service products that allow its customers to manage and optimize renewables and storage.
This utilities stock is an interesting play on wind power and green energy, which provides a good alternative in your portfolio to companies focused on crude oil, petrochemicals and natural gas liquids.
Goldman Sachs analyst Brian Lee said the recent pullback in solar and energy stocks is a good buying opportunity for FLNC stock, which he says has a 78% upside potential.
Third-quarter earnings of $536 million were 13% better than analysts expected, although the company still lost 20 cents per share.
FLNC stock has a “B” rating in the Portfolio Grader.
Cheniere Energy (LNG)
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Cheniere Energy (NYSEAMERICAN:LNG) doesn’t trade on the main New York Stock Exchange, but don’t that dissuade you. Cheniere is one of the best utilities stocks you can buy.
The company is the largest exporter of liquified natural gas in the U.S. and profits handsomely from its shipments to Europe. European customers badly needed natural gas because Russia cut off their supply in retaliation for the West’s sanctions against Moscow over its war with Ukraine.
As long as that conflict continues and Russia remains on the outs with Europe, Cheniere Energy will have a willing trading partner.
The company reported second-quarter revenue of $4.1 billion and net income of $1.4 billion. It also revised its full-year guidance from a range between $8.2 billion and $8.7 billion to a range of $8.3 billion and $8.8 billion.
LNG stock is up 7.5% in 2023 and has a “B” rating in the Portfolio Grader.
Antero Midstream (AM)
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Antero Midstream (NYSE:AM) is a midstream energy company with operations in the Appalachian Basin and the Marcellus and Utica shales. It’s one of the nation’s leading producers of natural gas liquids and natural gas, with enough inventory to last a few decades.
Earnings for the second quarter included revenue of $258.29 million, just beating expectations of $257.13 million.
The company also reported free cash flow after dividends of $31 million, a massive improvement from a year ago when it posted a $2 million deficit. The quarter was the fourth consecutive quarter of posting positive FCF after dividends.
The stock has rebounded nicely since April and shows a 10% gain in 2023. And then, when you add that to the company’s generous 7.5% dividend yield, you have a stock that gets a “B” rating in the Portfolio Grader.
On the date of publication, Louis Navellier had a long position in LNG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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