The rally in equities is being fueled, in large part, by optimism for a more business-friendly environment. That includes less of the regulation that has restricted business growth. This has many investors looking at small-cap stocks, but another area for investors to consider is utility stocks.
Utility companies are uniquely impacted by the increasing costs of complying with federal, state, and local regulations. This is due, in part, because of the shift towards renewable and zero-emissions energy sources.
The shift towards renewable energy isn’t going to stop. However, the next four years will bring a more pragmatic approach to the nation's energy policy, leaning toward an “all of the above” approach.
However, making this transition will take capital, and these companies will rely on a stable regulatory framework to provide a predictable revenue stream with sustainable earnings growth.
That combination, along with high-yield dividends, makes these utility stocks among the best opportunities for investors in 2025 and beyond.
1. Evergy: A Strong Backlog Will Fuel This Utility’s Growth
Evergy (NASDAQ:EVRG) touches virtually every part of the energy sector. The company generates electricity to its base of commercial, residential, and municipal customers in Kansas and Missouri via coal, landfill gas (i.e. methane), uranium, natural gas, solar, wind, and other renewable sources. If you’re looking for a company that embodies an all-of-the-above approach, you can find it here.
But does this jack-of-all-trades approach make the stock a good investment? If you look at the company’s projected earnings growth of between 4% and 6% through 2029, the answer would appear to be yes. A key reason for that earnings growth is the company’s backlog of projects, which includes two new data centers for Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META). Plus, the company will be providing power for Panasonic Holdings Corp. for an electric vehicle battery manufacturing facility.
In addition to the potential stock price growth that feeds on earnings growth, investors get a dividend with a 4.19% yield that the company has increased for 20 consecutive years. Over the last three years, the payout ratio of 6.55% has been more than double the rate of inflation.
2. Duke Energy Lets You Invest in Dividend Royalty
As is the case with many things, location matters quite a bit when it comes to utilities stocks. That’s true of Duke Energy (NYSE:DUK). Based in Charlotte, North Carolina, Duke provides power and natural gas to nearly 10 million customers across the southeast United States.
Duke is getting a tailwind from the population migration into its service areas. The company has also proactively worked with South Carolina and Florida to obtain regulatory settlements that provide predictability for revenue and earnings and support the company’s outlook for 5% to 7% earnings growth through 2028. And like many utilities, DUK stock offers investors a high-yield dividend that currently yields 3.68% and has been increasing for the last 20 consecutive years.
Duke Energy stock is up approximately 17% in 2024 as of December 5, 2024. It met resistance at its 52-week high of around $121, which closely matches the consensus price target of analysts who continue to offer a Moderate Buy rating on DUK stock.
3. WEC Energy Group: Big Capital Spending Plans Backed by a Strong Balance Sheet
WEC Energy Group (NYSE:WEC) operates in the upper Midwest, with its largest footprint in Wisconsin and Illinois. The stock has been a strong performer in 2024, climbing 16.8%. However, there’s likely to be more growth to come.
The company recently raised its five-year capital spending plan by $4.3 billion, covering the years 2025 through 2029. Much of this spending focuses on the company’s intention to eliminate coal as an energy source by 2032.
Utility companies need rock-solid balance sheets to execute plans like this. Fortunately, that’s the case with WEC Energy. The company has regulatory deals with both the Wisconsin and Illinois governments, fueling its forecast for compound annual earnings per share (EPS) growth between 6.5% and 7% between 2025 and 2029.
One driver of that business is expected to come from Microsoft (NASDAQ:MSFT) which announced a $3.3 billion investment in a data center facility in Wisconsin to help meet the demand for artificial intelligence.