Top utility stocks this month include Enlight Renewable Energy Ltd., Genie Energy Ltd., and Central Puerto S.A., which have each returned at least 51% over the past 12 months. Utilities stocks as a group, represented by the Utilities Select Sector SPDR ETF (XLU), have fallen 7% over the past 12 months, while the Russell 1000 index has fallen 12%.
U.S. energy prices surged in 2022 after Russia’s invasion of Ukraine and subsequent sanctions drove up the price of natural gas, which generates 40% of U.S. utility-scale electricity.That trend is expected to reverse in 2023, with energy prices seen dropping as much as 37%.
Nonetheless, utilities are often seen as a safe investment during recessions or periods of weak economic growth because demand for electricity, gas, and water services remains steady.
Below, we look at the top utilities stocks in the categories of best value, fastest growth, and most momentum. All data are as of March 28.
Best Value Utilities Stocks
These are the utilities stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
| Best Value Utilities Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/E Ratio | |
| Enel Chile S.A. (ENIC) | 2.34 | 3.2 | 2.3 |
| Brookfield Renewable Corp. (BEPC) | 32.32 | 5.6 | 3.7 |
| Pampa Energia S.A. (PAM) | 30.80 | 1.7 | 3.9 |
Source: YCharts
- Enel Chile S.A.: Enel is a Chilean-based electricity provider. The company creates electricity from solar, wind, and geothermal power plants.
- Brookfield Renewable Corp.: Brookfield Renewable owns and operates pure-play renewable energy facilities focusing on wind, solar, and hydroelectric power. Brookfield Renewable and EIG Consortium entered a binding agreement to acquire 100% of Origin Energy Ltd.’s energy markets business, “Australia’s largest integrated generation and retail company.”
- Pampa Eneregia S.A.: Pampa Energia is an integrated energy company based in Argentina operating hydroelectric plants, thermal plants, and wind farms. The company also explores and produces natural gas, oil, and various petrochemicals.
Fastest-Growing Utilities Stocks
These are the top utilities stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
| Fastest-Growing Utilities Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Enlight Renewable Energy Ltd. (ENLT) | 16.94 | 1.7 | N/A (see company description) | 146 |
| Brookfield Renewable Corp. (BEPC) | 32.32 | 5.6 | 6 | 633 |
| California Water Service Group (CWT) | 56.88 | 3.2 | 400 | 16 |
Source: YCharts
- Enlight Renewable Energy Ltd.: Enlight Renewable Energy is a renewable energy producer based in Israel with wind farms, solar energy projects, and integrated energy systems in Europe and the U.S. The company released its fourth-quarter earnings on March 15. Net income surged by 76% on top of 88% revenue growth, due in part to the acquisition of renewable energy projects and net proceeds from the company’s IPO. Enlight Renewable doesn’t have an EPS growth figure in the table above because of its recent IPO.
- Brookfield Renewable Corp.: See company description above.
- California Water Service Group: California Water Service provides drinking water and wastewater services in California, Washington, New Mexico, Texas, and Hawaii. Net income in the fourth quarter of 2022 increased fivefold from the year before, driven by increases in accrued unbilled revenue and rates.
Utilities Stocks With the Most Momentum
These are the utilities stocks that had the highest total return over the past 12 months.
| Utilities Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Genie Energy Ltd. (GNE) | 12.85 | 0.3 | 91 |
| Central Puerto S.A. (CEPU) | 5.61 | 0.8 | 51 |
| Constellation Energy Corp. (CEG) | 75.27 | 24.6 | 41 |
| Russell 1000 | N/A | N/A | -12 |
| Utilities Select Sector SPDR ETF (XLU) | N/A | N/A | -7 |
Source: YCharts
- Genie Energy Ltd.: Genie is an energy provider that supplies electricity and natural gas for residential and business customers. The company also operates a solar energy business segment. In late March, Genie Renewables acquired the rights to a 6.25-megawatt solar generation site in upstate New York.
- Central Puerto S.A.: Central Puerto generates and sells electricity to local customers in Argentina through wind farms, thermal generator plants, and hydroelectric facilities.
- Constellation Energy Corp.: Constellation Energy owns and operates nuclear, hydro, wind, natural gas, and solar generation facilities, providing energy to residential and commercial customers in the U.S., Canada, and the U.K. The company’s stock jumped in July when Senate Democrats announced a surprise deal on $369 billion in clean energy investments, passed into law as part of the Inflation Reduction Act of 2022.
The Impact of Interest Rates on Utilities Stocks
Those who invest in utilities stocks should understand how fluctuations in interest rates can influence their performance. Typically, changing interest rates affect this sector in two ways: competition with fixed-interest securities and the cost of servicing debt.
Competition With Fixed Interest Securities: Generally, those who invest in this group prefer yield over growth. Therefore, when interest rates are high, these investors favor fixed-interest securities over utilities stocks as they provide attractive risk-free returns.
For example, if the U.S. 10-year Treasury note and a utilities stock both yield 3%, risk-averse investors would invest in the Treasury note because it offers the same yield but isn’t affected by company or market risk. However, these investors would favor utilities stocks over fixed-interest securities when interest rates are low or falling because the utilities stocks offer greater returns while typically displaying lower volatility than stocks in other sectors.
Cost of Servicing Debt: Utilities companies carry high debt levels to build, maintain, and upgrade essential infrastructure, such as electricity grids, gas pipelines, water systems, and renewable energy sources. Therefore, servicing that debt becomes more difficult when interest rates rise. If utilities companies are unable to pass extra financing costs on to customers, they may be partially borne by investors.
Advantages of Utilities Stocks
Most utilities companies pay investors steady dividends as they form part of a regulated industry with highly predictable cash flows. In addition, ongoing demand for their services, irrespective of the economy’s health, makes them an attractive safe-haven investment during periods of economic uncertainty, such as during a recession or downturn.
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