While electric vehicles eventually will change the footprint for internal combustion engine automobiles here and across the world, the reality is that we will need a ton of electricity generation to meet what will become a huge demand. Goldman Sachs notes that while currently, battery electric vehicles and plug-in hybrid electric vehicles make up only 1% of the total U.S. vehicles on the road, as increased penetration occurs, this should drive an uptick to the firm’s power demand forecast and outlook.
[in-text-ad]
More conservative investors looking to capitalize on what is clearly a burgeoning long-term trend with massive upside may want to consider ancillary ways to play the electric vehicle (EV) industry, and power generation may be just the ticket as it comes with solid and dependable dividends. Goldman Sachs has taken a long look into the future and noted this in a recent research report:

The GS equity research team focused on the US automotive sector expects EVs to comprise 13% of the automotive fleet by 2030 and 32% by 2040 — we complete and incorporate an updated EV impact on US power demand, an impact which adds an incremental 2.4% to our 2030 power demand forecast and 5.7% to our 2040 outlook. We now expect 1.04% /0.73% average power demand growth rate for 2020-2030/ 2030-2040 including EVs – an uplift compared to our 0.61% ex-EV power demand growth forecast for 2020-2040.

The analysts are positive on long-term power growth for regular providers, especially after 2025, and also are positive on clean energy providers. It makes sense that you don’t want to be burning coal to generate electricity for cars that run on it.

Five Buy-rated stocks were highlighted and all make sense for investors with an eye toward the future, but perhaps a more conservative investment profile. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision. 

Edison International

This top utility continues to raise its dividend on a steady basis, and it is one of two conventional providers featured here. Edison International (NYSE: EIX) generates and distributes electric power. As of March 3, 2021, it delivered electricity to 15 million residential, commercial, industrial, public authorities, agricultural and other customers across southern, central and coastal California.

Edison International also provides energy solutions to commercial and industrial users. Its transmission facilities consist of lines ranging from 55 kV to 500 kV and substations, and the distribution system consists of approximately 39,000 circuit-miles of overhead lines, approximately 31,000 circuit-miles of underground lines and 800 substations.

Investors receive a 4.64% dividend. Goldman Sachs has a $75 price target on the shares, and the consensus target is $71.50. Edison International stock closed on Tuesday at $57.15, which was up almost 3% on the day.

This top utility stock also still makes good sense now for conservative investors looking toward the EV future. Clean energy provider Exelon Corp. (NYSE: EXC) engages in the energy generation, delivery, and marketing businesses in the United States and Canada. It owns nuclear, fossil, wind, hydroelectric, biomass and solar generating facilities.
[in-text-ad]
The company also sells electricity to wholesale and retail customers, and it sells natural gas, renewable energy and other energy-related products and services. Furthermore, it is involved in the purchase and regulated retail sale of electricity and natural gas, as well as the transmission and distribution of electricity and distribution of natural gas to retail customers.

The company also offers support services, including legal, human resources, information technology, financial, supply management, accounting, engineering, customer operations, distribution and transmission planning, asset management, system operations and power procurement services. It serves distribution utilities, municipalities, cooperatives and financial institutions, as well as commercial, industrial, governmental and residential customers.

Exelon stock investors receive a 3.24% dividend. The Goldman Sachs price target is $53, while the consensus target is $50.21. Shares closed at $47.24 on Tuesday.

NextEra Energy

NextEra Energy Inc. (NYSE: NEE) consists of two main business segments: the Florida Power & Light (FPL) regulated utility, and NextEra Energy Resources, a deregulated generator of predominantly wind, natural gas, nuclear and solar powered assets in North America. The company also holds a 65.1% share in the yieldco NextEra Energy Partners.

FPL announced last year a groundbreaking “30-by-30” plan to install more than 30 million solar panels by 2030 and make the state of Florida a world leader in the production of solar energy. It and NextEra Energy Resources are already the world’s largest producers of renewable energy from the wind and sun. When this plan is completed, FPL expects to be the largest utility owner and operator of solar in America.

Investors receive a 2.0% dividend. Goldman Sachs has set its price objective at $93. The posted consensus figure is $87.50, and NextEra Energy stock ended Tuesday at $77.86.

While possibly not as well known as the other companies, this is another solid clean energy idea for investors to consider. Public Service Enterprise Group Inc. (NYSE: PEG) operates as an energy company primarily in the northeastern and Mid-Atlantic United States. It operates through two segments.
[in-text-ad]
The PSE&G segment transmits electricity, and it distributes electricity and gas to residential, commercial and industrial customers, as well as invests in solar generation projects and energy efficiency and related programs. It also offers appliance services and repairs. As of December 31, 2020, it had electric transmission and distribution system of 25,000 circuit miles and 860,000 poles; 54 switching stations with an installed capacity of 38,353 megavolt-amperes (MVA) and 245 substations with an installed capacity of 8,647 MVA; four electric distribution headquarters and five electric sub-headquarters; and 18,000 miles of gas mains, 12 gas distribution headquarters, two sub-headquarters and one meter shop, as well as 58 natural gas metering and regulating stations.

The Power segment operates nuclear, gas, oil-fired and renewable generation assets. It has total generating output of approximately 52,900 gigawatts hours, and it owns and operates 467 MW direct current of photovoltaic solar generation facilities.

Investors receive a 3.25% dividend. The Goldman Sachs price target is $67. The $67.51 consensus target is a bit higher, and Tuesday’s closing print was $62.85 per share.

Sempra Energy

This is the other conventional provider, and its stock is a very solid defensive play. Sempra Energy (NYSE: SRE) is a natural gas transmission and distribution company headquartered in San Diego. The company’s California Utilities segment distributes gas and electricity to approximately 25 million customers in southern California via South California Gas and San Diego Gas and Electric.

The company’s Cameron LNG project in Louisiana could restart this month, if it is able to safely receive electricity, multiple media outlets reported last week. The terminal was temporarily closed in late August due to Hurricane Laura. Cameron LNG could also see power restored at its U.S. Gulf Coast export facility by Sept. 30.

Shareholders receive a 3.32% dividend. The $149 Goldman Sachs price target is just below the $150.87 consensus target. Sempra Energy stock closed on Tuesday at $132.63 a share.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Again, the EV revolution is still in its infancy, but by playing the power-generation angle, conservative investors can have a piece of the action at one point, and get paid solid and dependable dividends while they wait for the growth in generation and use. Plus, in a very overbought and expensive stock market, these are good defensive ideas now.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.