5 Utility Stocks That Fared Better Than The Sector In 2017

With only 10 days remaining before we ring in 2018, this is the time to look back at failed investment decisions and plan a better strategy. The year 2017 has been profitable for most investors, with major indices gaining year to date. This trend is likely to continue in 2018. The S&P 500 and Nasdaq have rallied 18.6% and 11.2%, respectively, so far this year.

The rise in the indices reflects improving economy in the United States. Per the Bureau of Economic Analysis, gross domestic product (GDP) rose 3.3% in the third quarter of 2017, up from 3.1% in the second quarter.

The decisions made by the new administration have been effective, lowering volatility in the market and paving the way for strong performance. The declining unemployment rate and low inflation rate indicate a strong economy. A recent report from the balance indicates that these factors will continue to drive the economy in 2018.

Amid the positive trends, let us focus on the domestic defensive Utility sector. All other industries depend on Utilities for the basic requirements of electricity, gas and water. The ongoing growth will result in higher demand from industrial, commercial and residential space for utility services and boost its performance.

Utility Stocks Performance YTD

Utility sector — one of the 16 Zacks sectors —yielded 6.6% year to date, underperforming the S&P 500 index’s return of 18.6%.

The capital intensive mature utility stocks have witnessed capital cost hike, thanks to rising interest rates. In addition, the weather pattern and recent hurricanes have also dented the performance of some utilities.

However, despite the negative impact, the fundamental strength of these regulated utilities helped them register a steady performance. Utility sector earnings in 2017 and 2018 are expected to improve 2.4% and 4.8%, on the back of revenue growth of 4.2% and 1.6%, respectively. Read more on weekly Zacks Earnings Trends.

Picking 5 Utilities

Picking up the right utility stocks is a lengthy process. So we have used the Zacks Stock Screener to find out stocks that have outperformed the Utility sector’s return of 7.2% and are expected to perform favorably.

We have considered only Buy–rated stocks along with market capitalization of more than $9.5 billion, as they are safe bets. Investing in these utilities not only result in stock price appreciation but a regular return through dividend.

Here are stocks that made it through the screen. All of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

E.ON SE (DE:EONGn) (OTC:EONGY) is an energy service provider with operations in the following businesses: energy, chemicals, real estate, oil, telecommunications, distribution/logistics, aluminum and silicon wafers.

Shares of EONGY have gained 58.2% year to date, outperforming utility sector’s year to date return of 6.6%

Market Cap: $21.8 billion
5 yr Dividend Yield: 3.68%
Projected EPS Growth (three to five years): 13.95%

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American Water Works Company (NYSE:AWK) provides essential water and wastewater services to over 15 million customers in 47 states, the District of Columbia and Ontario, Canada. The company continues to expand customer base through acquisition and organic growth.

Shares of American Water Works have gained 22.7% year to date, outperforming utility sector’s rally of 6.6%.

Market Cap: $15.87 billion
5 yr Dividend Yield: 2.34%
Projected EPS Growth (three to five years): 7.47%

NextEra Energy (NYSE:NEE) is a public utility holding company engaged in the generation, transmission, distribution, and sale of electric energy. NextEra Energy had generating capacity of around 46,500 megawatts (MW).

Shares of NextEra Energy have returned 29.5% year to date, outperforming utility rally of 6.6%.

Market Cap: $72.48 billion
5 yr Dividend Yield: 3.01%
Projected EPS Growth (three to five years): 7.45%

Atmos Energy Corporation (NYSE:ATO) , along with its subsidiaries, engages in the distribution, transmission and storage of natural gas in the United States. The company provides services to more than 3 million customers.

Shares of Atmos Energy have gained 16.5% year to date, outperforming utility sector’s year to date return of 6.6%.

Market Cap: $9.67 billion
5 yr Dividend Yield: 2.81%
Projected EPS Growth (three to five years): 7.00%

Consolidated Edison, Inc., (NYSE:ED) , along with subsidiaries, engages in regulated electric, gas, and steam delivery businesses in the United States. The company provides service to nearly 3.6 million electric customers and 1.2 million natural gas customers.

Shares of Consolidated Edison have gained 16.1% year to date, outperforming utility sector’s year to date return of 6.6%.

Market Cap: $26.52 billion
5 yr Dividend Yield: 3.98%
Projected EPS Growth (three to five years): 2.00%

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NextEra Energy, Inc. (NEE): Free Stock Analysis Report

Consolidated Edison Inc (ED): Free Stock Analysis Report

E.ON SE (EONGY): Free Stock Analysis Report

Atmos Energy Corporation (ATO): Free Stock Analysis Report

American Water Works (AWK): Free Stock Analysis Report

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