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Don't Overlook This Reliable, Dividend-Paying Sector

utilities stocks to buy

Key Points

What happens when markets go into panic mode? Investors turn to asset classes or sectors they believe are likely to either pay a dividend or that have a low correlation to equity markets. 

On March 15, utilities, as tracked by the Utilities Select Sector SPDR Fund NYSEARCA: XLU, advanced 1.36% in volume which was 92% heavier than normal. 

That was the best performance among the 11 S&P sectors in the session. Utilities are also the best performers over the past five sessions. Those gains occurred as markets were rattled by banks in the U.S. and Europe. 

The sector’s top four components rose in the March 15 session. Those stocks and their daily percent changes were:

When it comes to the sector internals, American Electric Power and Xcel Energy Inc NASDAQ: XEL were among the day's top performers, posting gains of 2.6% and 2.2%, respectively.

Here are some lesser-known utilities that have stood out from the pack recently. Both are very small companies, meaning it may be riskier to trade. 

Genie Energy

Small-cap Genie Energy Ltd. NYSE: GNE was the utility with the best gains, advancing 4.15% in the session in heavier-than-average turnover.

Never heard of Genie? That’s not a surprise, given that the stock only has a market cap of $244.1 million. The Newark, New Jersey company provides electricity, natural gas, and solar power to residential and small business customers in the U.S. and Europe. Despite a 23% drop immediately after reporting earnings on March 13, the stock is up 50.51% on a one-year basis. 

Many small companies got slammed on Monday as investors fretted about their exposure to banks unable to give depositors their money. 

However, in the earnings call, Genie CEO Michael Stein offered reassurances, saying, “We tend to put our deposits with even larger financial institutions than those and the ones that are a little bit more run of the mill as opposed to more niche kinds of players. And our money is in very safe triple-pay-rate kinds of instruments. But yes, of course, we're constantly reviewing.”

As a group, utilities are known as dividend payers. Even Genie has a yield of 3%. 

Via Renewables

Via Renewables Inc. NASDAQ: VIA  has a yield of 14.8%, the highest in the sector. This is a tiny Houston-based company whose market cap is just $78.2 million. 

The company, formerly known as Spark Energy, is an independent retail energy services company providing electricity and natural gas to residential and commercial customers in 19 states. 

If your eyes are popping because of the yield, take a minute to consider: In many cases, a stock’s yield is high because shares have dropped. Via Renewables’ dividend per share is $0.73. The share price is down 33.74% on a one-year basis, which explains that yield. 

Use extra caution whenever you see a stock with a very small market cap, as well as a too-good-to-be-true dividend yield.

What’s Next For Utilities? 

According to a utility-industry analysis by consulting firm Deloitte, five main trends are likely to affect utilities in 2023. 

  • Utilities increasingly plan to roll out the next wave of advanced metering infrastructure.
  • Environmental, social, and governance (ESG) reporting continues to gain momentum.
  • Battery storage deployments set to accelerate despite supply chain snags.
  • Power and utility companies see opportunities to reap value from clean hydrogen.
  • Utilities are likely to sharpen focus on preparing for electric vehicle growth.

While it may seem like utilities are a sleepy, slow-growing corner of the market, they’re clearly evolving to address and incorporate new technologies. 

Utilities, especially the less volatile larger companies, can be reliable additions to a portfolio, as they typically have dependable revenue streams and dividend payouts. Although they’re not the most exciting sector, they can help mitigate volatility during market downturns.

Should You Invest $1,000 in Utilities Select Sector SPDR Fund Right Now?

Before you consider Utilities Select Sector SPDR Fund, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Utilities Select Sector SPDR Fund wasn't on the list.

While Utilities Select Sector SPDR Fund currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Kate Stalter
About The Author

Kate Stalter

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Utilities Select Sector SPDR Fund (XLU)N/A$82.77+0.3%2.75%20.82Moderate Buy$82.77
NextEra Energy (NEE)
4.9004 of 5 stars
$74.37+0.7%3.04%22.07Hold$83.46
Duke Energy (DUK)
4.5386 of 5 stars
$117.27+0.2%3.56%20.54Moderate Buy$126.00
Southern (SO)
4.2365 of 5 stars
$90.79+1.5%3.26%22.64Hold$92.21
American Electric Power (AEP)
4.573 of 5 stars
$103.730.0%3.59%18.52Hold$105.77
Xcel Energy (XEL)
4.0306 of 5 stars
$72.32+0.2%3.15%21.02Moderate Buy$76.00
Genie Energy (GNE)
1.2909 of 5 stars
$19.40+0.9%1.55%138.58N/AN/A
Via Renewables (VIA)N/A$11.00flat32.92%2.74N/AN/A
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