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- Artificial intelligence and bitcoin mining are leading the surge in energy demand.
- Expect to see more outperformance for the utility sector in 2025.
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Utility stocks have shined in 2024, up a stunning 23%. With interest rates set to fall for the rest of 2024 and perhaps as much as another 100-basis-point cut in 2025, growth and income investors will continue to load up on the sector. Top Wall Street utility analysts are quite bullish on the industry, which for years was only considered a viable investment for “widows and orphans.”
We have recently seen and reported on a fast-growing and strong trend: Big tech is starting to partner with major utility companies to advance the use of nuclear power to help bridge the widening gap between power generation and needs. Microsoft Corp. (NASDAQ: MSFT | MSFT Price Prediction) and Constellation Energy Corp. (NYSE: CEG) are discussing reopening a closed-down reactor at 3 Mile Island, the site of the most significant U.S. nuclear accident in 1979, while Amazon.com Inc. (NASDAQ: AMZN) announced it has signed an agreement with Dominion Energy Inc. (NYSE: D), Virginia’s utility company, to explore the development of a small modular nuclear reactor, near Dominion’s existing North Anna nuclear power station.
Many of the top analysts on Wall Street in both the tech and utility sectors feel that the collaboration between tech stocks and electric utilities is the natural outcome of the tech industry’s increasing energy demands, a growing challenge to forge a commitment to sustainability, and the need for innovation in energy management and infrastructure.
We screened our 24/7 Wall Street utility sector database and found four top large-cap companies that could be next to hop in bed with a tech giant. All four pay big and dependable dividends and are Buy-rated at top Wall Street firms.
Why are we covering utility stocks?
Equities will be hit if the major stock market indices significantly decline. However, history shows that stodgy utility stocks will likely hold their ground much better than high-flying technology stocks. With big tech looking for more energy to power artificial intelligence and data center needs, this sector should remain hot. With a product always in demand and the winter cold right around the corner, high-yielding utilities may also be the best idea now for worried investors.
American Electric Power
One of the largest electric utility companies in the country, with more than 5 million customers in 11 states.
This industry-leading utility pays investors a hefty 3.50% dividend. American Electric Power Co. Inc. (NYSE: AEP) is an electric public utility holding company that generates, transmits, and distributes electricity for sale to retail and wholesale customers in the United States.
It operates through:
- Vertically Integrated Utilities
- Transmission and Distribution Utilities
- AEP Transmission Holdco
- Generation & Marketing
The company generates electricity using:
- Coal
- Lignite
- Natural gas
- Renewable energy
- Nuclear energy
- Hydro
- Solar energy
- Wind and other energy sources
It also supplies and markets electric power wholesale to other electric utility companies, rural electric cooperatives, municipalities, and other market participants.
Dominion Energy
This integrated energy utility offers electricity, natural gas, and related services.
Many of the Wall Street firms we cover are still very positive on utilities, and this company, as mentioned earlier, is working with big tech and pays a strong 4.46% dividend. Dominion Energy Inc. (NYSE: D) operates through four segments:
- Dominion Energy Virginia
- Gas Distribution
- Dominion Energy South Carolina
- Contracted Assets.
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:
- Regulated natural gas gathering
- Transportation
- Distribution and sales activities
- 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.
The company’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
- 94,200 miles of gas distribution lines
Dominion serves approximately 7 million customers.
Duke Energy
An American electric power and natural gas holding company.
This company is an industry leader and offers shareholders a solid 3.46% dividend. Dike Energy Inc. (NYSE: DUK) and its subsidiaries operate as an energy company in the United States. It operates through two segments:
- Electric Utilities and Infrastructure (EU&I)
- Gas Utilities and Infrastructure (GU&I)
The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest. It generates electricity through:
- Coal,
- Hydroelectric
- Natural gas
- Oil
- Solar and wind sources
- Renewables
- Nuclear fuel
This segment also sells electricity to municipalities, electric cooperative utilities, and load-serving entities.
The GU&I segment distributes natural gas to residential, commercial, industrial, and power generation customers and invests in pipeline transmission projects, renewable natural gas projects, and natural gas storage facilities.
Xcel Energy
An electric utility and natural gas delivery company based in Minneapolis, Minnesota,
This company serves eight states in the Midwest and pays shareholders a very dependable 3.42% dividend. Xcel Energy Inc. (NASDAQ: XEL), through its subsidiaries, generates, purchases, transmits, distributes, and sells electricity.
It operates through:
- Regulated Electric Utility
- Regulated Natural Gas Utility
- All Other segments
The company generates electricity through:
- Wind
- Nuclear
- Hydroelectric
- Biomass
- Solar energy
- Coal
- Natural gas
- Oil
- Wood
- Refuse-derived fuels
It also purchases, transports, distributes, and sells natural gas to retail customers and transports customer-owned natural gas. In addition, the company develops and leases natural gas pipelines and storage and compression facilities, invests in rental housing projects and nonregulated assets, and procures equipment for the construction of renewable generation facilities.
It serves residential, commercial, and industrial customers in:
- Colorado
- Michigan
- Minnesota
- New Mexico
- North Dakota
- South Dakota
- Texas
- Wisconsin
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