All we heard for most of 2015 is the trade in the utility stocks is over. Interest rates were going higher, and the stocks will be sold off big time. And the pundits were right for at least the first half of 2015. The high-flying sector that brought wonderful returns in the years following the 2008 and 2009 meltdown got hammered. But guess what? Only one sector is higher so far in 2016, and it is the utility sector.

With the thought of any further interest rate hikes all but off the table, and current Treasury yields lower than they were at this time last year, buying safe utility stocks now to ride out the storm makes absolute sense for growth and income and conservative accounts. We screened the Merrill Lynch research database and found four outstanding stocks to buy now.

Dominion Resources

Many of the Wall Street firms that we cover are becoming more positive on utilities again after last year’s underperformance, and this company tops many lists. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.

Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers around regulated natural gas distribution and storage.

Investors are paid a solid 3.76% dividend. The Merrill Lynch price target for the stock is $79, and the Thomson/First Call consensus target is $77.59. The stock closed Friday at $68.88.

Entergy

This higher yielding company was recently upgraded and makes the buy list at Merrill Lynch. Entergy Corp. (NYSE: ETR) is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation’s leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees.

Many analysts like the position of the company’s plants, as they supply some of the petrochemical industry along the Gulf Coast. Petrochemical plants and liquefied natural gas export facilities are springing up all across the central gulf coast. For the petrochemical industry, the boom is driven by demand, not supply, and so the current lower gas prices actually help this growth trend, which has been a solid revenue silo for Entergy.

Entergy investors receive an outstanding 5% dividend. The $72 Merrill Lynch price target is in line with the consensus estimate of $72.06. The stock closed Friday at $68.09.
PG&E

This is another utility rated Buy at Merrill Lynch that investors can feel super-comfortable owning now. PG&E Corp. (NYSE: PCG) is one of the largest combined natural gas and electric utilities in the United States. Based in San Francisco, with more than 20,000 employees, the company delivers energy to nearly 16 million people in northern and central California.

PG&E operates 141,215 circuit miles of electric distribution lines, 18,616 circuit miles of interconnected transmission lines, 42,141 miles of natural gas distribution pipelines and 6,438 miles of gas transportation pipelines. It also operates generation facilities with energy sources such as nuclear, hydroelectric, fossil fuel-fired and photovoltaic.

PG&E shareholders are paid a 3.45% dividend. Merrill Lynch has a $57 price target, while the consensus target is $51.12. Shares closed most recently at $52.72.

PPL

This utility beat third-quarter earnings expectations but came in a little light on the revenue side. PPL Corp. (NYSE: PPL) serves 321,000 natural gas and 397,000 electric customers in Louisville and 16 surrounding counties, as well as 543,000 customers in 77 Kentucky counties and five counties in Virginia. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania, and it operates electricity distribution network for the Midlands, South West, and Wales in the United Kingdom.

In addition, PPL offers a range of customer-care and back-office services to competitive retail energy suppliers, including customer enrollments; contract management; electronic data exchange; simple and complex billing; and call center operations comprising telemarketing, payment processing and collections of overdue accounts.

The company is one of the leading utility companies in the United States that plans to continue to increase regulated operations and lower earnings volatility attached to competitive operations. PPL raised cash and lowered debt late last year be selling some hydroelectric assets to Northwestern energy.

Investors receive a generous dividend of 4.54%. The Merrill Lynch price target is $36, but the consensus target is a bit higher at $36.38. The stock ended last week at $33.29.

The huge capital gains for the sector from the quantitative easing days may be in the rear-view mirror, but that doesn’t change the upside potential for these top companies. Even with rate increases starting to hit the tape, they will remain small and very slow, if they happen at all, and should have a negligible effect. These top stocks make excellent additions to growth and income total return portfolios looking for safety now.

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