3 Great Utility Stocks to Buy for Steady Stream of Income

Industry Overview - The Zacks Utilities sector includes companies providing essential services such as water, sewage, electricity, and natural gas, characterized as a defensive industry due to stable income sources and minimal economic impact [1] - Utility companies benefit from low demand variation, new electric rates, customer additions, cost management, and energy-efficiency programs [1] Investment Characteristics - Regular dividends, bonus shares, share repurchases, and price increases offer investors returns, making established utility companies attractive for consistent income [2] - Utilities are often viewed as alternatives to bonds due to their stable performance and regular dividend payments, which tend to be less volatile than other stocks [2] Earnings Growth - The utility sector is projected to experience a 9.1% earnings growth in Q4 2024, with continued momentum expected in the first half of 2025 [3] Interest Rate Impact - Utilities carry significant debt due to capital-intensive infrastructure, making them sensitive to market interest rate changes; recent Fed rate cuts are expected to improve margins and profitability for these companies [4] Renewable Energy Transition - The U.S. electric power sector is shifting towards cleaner energy sources, with renewable energy expected to account for 23% of electricity generation in 2024 and 25% in 2025 [5] - A 2% increase in electricity sales is anticipated this winter, driven by a 3% rise in residential sales due to colder weather [5] Promising Utility Stocks - New Jersey Resources (NJR), Dominion Energy (D), and Evergy (EVRG) have outperformed the Zacks Utilities sector in the past six months, with ongoing investments expected to enhance revenue and free cash flow [6] - NJR has a dividend yield of 3.78%, with a projected 5.8% EPS growth for fiscal 2025, and has gained 13.9% over the past six months [10] - Dominion Energy plans to invest $9.8 billion in 2024 and $43 billion from 2025 to 2029, with a current dividend yield of 4.99% and a projected 22.9% EPS growth for 2025 [11][12] - Evergy targets $16.2 billion in capital investments from 2025 to 2029, with a current dividend yield of 4.35% and a projected 4.9% EPS growth for 2025 [13]