While the fears of negative interest rates are unlikely to resurface again any time soon, there’s good reason to believe that Federal Reserve Chair Powell (or whoever replaces him) doesn’t start to raise interest rates until 2023. This is even though the Fed likely will start to taper the $120 billion per month quantitative easing purchase of bonds in November and wrap up the buying by the end of 2022. However, there is a school of thought across Wall Street that the rate lift-off may not begin until 2024.

What that means for income investors is the same old story. Treasury and corporate bonds pay nothing, and bank certificates of deposit continue to offer pathetic interest rates. The highest yielding five-year CD we could find paid a paltry 1.1%, and there are big penalties for cashing in early.

For those worried about a bloated and overbought stock market, but needing some reasonable and dependable dividends, the place to look at is the utilities sector. We screened our 24/7 Wall St. utility research universe and found five top companies that are offering dependable and safe dividends, as well as the potential for some capital gains. While all five are rated Buy at major Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

American Electric Power

This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states.

The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which also will be accretive.

American Electric Power stock investors receive a 3.37% dividend. Morgan Stanley has a $110 price target on the shares, while the consensus target is $97.59. The stock closed on Tuesday at $87.83 a share.

Many of the Wall Street firms that we cover are still very positive on utilities, and this company is highly rated. Dominion Energy Inc. (NYSE: D) is an American power and energy company that operates through the following four segments:

• The Dominion Energy Virginia segment generates, transmits and distributes regulated electricity to residential, commercial, industrial and governmental customers in Virginia and North Carolina.
• The Gas Distribution segment engages in the regulated natural gas gathering, transportation, distribution and sales activities, as well as distributes nonregulated renewable natural gas. This segment serves residential, commercial and industrial customers.
• The Dominion Energy South Carolina segment generates, transmits and distributes electricity and natural gas to residential, commercial and industrial customers in South Carolina.
• And the Contracted Assets segment is involved in the energy marketing and price risk activities.

As of December 31, 2020, Dominion Energy’s portfolio of assets included approximately 30.2 gigawatts of electric generating capacity; 10,500 miles of electric transmission lines; 85,600 miles of electric distribution lines; and 94,200 miles of gas distribution lines. It serves approximately 7 million customers. The company sells electricity at wholesale prices to rural electric cooperatives and municipalities, as well as into wholesale electricity markets.

Shareholders receive a 3.31% dividend. The BofA Securities target price for Dominion Energy stock is $85, which is in line with the $84.96 consensus target. Tuesday’s last trade was at $76.15 per share.

DTE Energy

With the potential for cold winter weather on the horizon, this company may look to extend gains into 2022. DTE Energy Inc. (NYSE: DTE) is the largest utility in Michigan. Its largest operating units are DTE Electric, an electric utility serving 2.2 million customers in southeastern Michigan, and DTE Gas, a natural gas utility serving 1.3 million customers in the state. DTE Energy also has non-utility energy businesses that focus on power and industrial projects, natural gas midstream and energy trading.

The company’s Gas segment purchases, stores, transports, distributes and sells natural gas to residential, commercial and industrial customers throughout Michigan, and it sells storage and transportation capacity. This segment has approximately 19,800 miles of distribution mains, 1,305,000 service pipelines and 1,273,000 active meters, as well as approximately 2,000 miles of transmission pipelines.

Its Gas Storage and Pipelines segment owns natural gas storage fields, lateral and gathering pipeline systems and compression and surface facilities. It also has ownership interests in interstate pipelines serving the Midwest, Ontario and northeast markets.

The company’s Power and Industrial Projects segment offers metallurgical coke, pulverized coal and petroleum coke to the steel, pulp and paper, and other industries, as well as power, steam and chilled water production and wastewater treatment services. It also supplies compressed air to industrial customers.

Shareholders receive a 2.81% dividend. DTE Energy stock is on the Goldman Sachs Conviction List of top stocks, and the firm’s price objective is $137. That compares with a lower $127.70 consensus target and Tuesday’s closing price of $117.42.

This top utility continues to raise its dividend on a steady basis. 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 4.53% dividend. The $74 Goldman Sachs price target is above the $70.03 consensus target. Edison International stock closed at $58.48 on Tuesday.

Southern Company

This large-cap utility leader makes sense for very conservative investors. Southern Company (NYSE: SO) engages in the generation, transmission and distribution of electricity. It also constructs, acquires, owns and manages power generation assets, including renewable energy and battery energy storage projects and sells electricity in the wholesale market.

The company distributes natural gas in Illinois, Georgia, Virginia and Tennessee, as well as provides gas marketing services, wholesale gas services and gas pipeline investments operations. It constructs, operates, and maintains 75,924 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial, and industrial customers. The company serves approximately 8.6 million electric and gas utility customers.

Southern Company also owns or operates 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear generating stations, 13 combined cycle/cogeneration stations, 44 solar facilities, 13 wind facilities, one fuel cell facility and one battery storage facility. It also provides products and services in the areas of energy efficiency and utility infrastructure. In addition, the company offers digital wireless communications and fiber optics services.

Shareholders receive a 4.00% dividend. BofA Securities has set its price target at $71. The consensus target for Southern Company stock is $68.45. The shares ended Tuesday’s trading at $65.97 a share.

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While the days of big capital gains for this sector are probably long over, it always makes sense to keep a weighting of utility stocks in a well-rounded portfolio. This is also a solid and somewhat contrarian play for investors now, and the stocks will hold up well when the long-awaited correction finally comes.

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