Utility stocks, known for their stable cash flow and high-paying dividends, have been out of favor over the past year as investors prioritized leading consumer cyclical and technology names that benefited from people spending more time at home during the pandemic.
However, the group may see renewed buying interest this year as the lure of predictable earnings and above-average yields in an unpredictable environment may draw in those looking for lower-risk investment options.
Below, we review three utilities stocks that appear ready to move higher in the months ahead.
Consolidated Edison, Inc.
With a market capitalization of $23.31 billion, Consolidated Edison, Inc. (ED) provides steam, natural gas, and electricity to customers on the U.S. East Coast. The utility also has a renewable energy segment generating gas and electric transmission. Edison has grown its dividend by an average of 3.5% each year for 45 consecutive years. The stock currently issues a 4.51% yield and has slipped 3.68% year to date (YTD).
Charts wise, the stock temporarily broke below crucial support at $69.50 but closed above that level Wednesday, increasing the possibility of a possible head-fake trade. Traders should look for a test of key resistance at $83.
Duke Energy Corporation
Duke Energy Corporation (DUK) provides regulated utility services to more than 7 million customers in the midwestern and southern USA. The 15-year-old energy giant, which trades flat on the year, operates through three divisions: gas utilities and infrastructure; and commercial renewables. Duke has increased its dividend for the past 14 consecutive years by an average of around 3%, currently offering investors a yield of 4.34%.
From a technical standpoint, the company’s share price has traded within a falling wedge pattern since early November but broke above the pattern’s top trendline in Wednesday’s session. Further upside momentum could see price test significant resistance levels at $99 and $104.
WEC Energy Group, Inc.
Milwaukee-based WEC Energy Group, Inc. (WEC) distributes gas and electricity to customers in Illinois, Michigan, Minnesota, and Wisconsin. Barclays analyst Eric Beaumont upgraded the company’s stock to ‘Equal-Weight’ from ‘Underweight’ this week, saying it has an above-average growth trajectory, similar to comparable industry peers. Beaumont maintained his 12-month price target on the shares at $107, indicating a 22% premium to Wednesday’s $87.86 close. The company pays a 3.18% dividend yield and trades 4.53% lower since the start of the year.
The stock rallied yesterday from the lower trendline of a two-month falling wedge pattern that finds support from the May and June swing lows around $84.50. A move higher from this area could see bulls test major resistance at $105.50.
For a look at today’s earnings schedule, check out our earnings calendar.