With the S&P 500 and Nasdaq still near record highs now may be a good time to scope out utility stocks which can serve as defensive investments in case of an eventual correction.
Utility stocks are deemed defensive as electricity, water, and gas services are essential regardless of the broader economic conditions.
Seeing as their services have consistent and stable demand, it's noteworthy that three utility stocks were added to the Zacks Rank #1 (Strong Buy) list over the last week.
National Fuel Gas Company NFG
We’ll start with National Fuel Gas Company, an integrated energy company with natural gas assets in the prolific Appalachian basin along with oil-producing assets in California.
As a renowned natural gas distributor, National Fuel Gas is considered a Dividend King having increased its dividend for more than 50 years. NFG has a current annual dividend yield of 3.8% which easily tops the S&P 500’s 1.25% average and is roughly on par with its Zacks Utility-Gas Distribution Industry average.
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Furthermore, NFG currently trades at 10.6X forward earnings and at a pleasant discount to the S&P 500’s 23.5X and its industry average of 14X. Better still, annual earnings are expected to dip -2% this year but are forecasted to rebound and spike 15% in fiscal 2025 to $5.83 per share. This is accompanied by steady sales growth and NFG also checks the boxes in terms of key metrics like Return on Equity (ROE) and debt to capital.
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Primo Water PRMW
As a pure-play water solutions provider in North America and Europe, Primo Water’s stock is attractive with its increased profitability standing out in particular. Primo Water’s annual earnings are now projected to climb 53% in FY24 to $0.95 per share compared to $0.62 a share last year. Plus, FY25 EPS is slated to spike another 16%.
More intriguing is that earnings estimate revisions for FY24 and FY25 are up 8% and 3% over the last 60 days respectively and PRMW offers a very respectable 1.7% annual dividend yield which it has increased 13 times in the last five years.
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Veolia Environnement VEOEY
Rounding out the list is Veolia Environnement which is considered the only global company to offer the entire range of environmental services in the water, waste management, energy, and transportation sectors.
Veolia Environnement’s expansion is very enticing making its stock look cheap trading at $15 and just 7.3X forward earnings. To that point, annual earnings are expected to soar 207% this year to $2.18 per share versus $0.71 a share in 2023. Even better, FY25 EPS is projected to rise another 12%.
Total sales are expected to be up 8% in FY24 and are forecasted to increase another 2% in FY25 to $49.85 billion. The cherry on top is that VEOEY has a 2.79% annual dividend yield that tops the benchmark and the Zacks Utility-Water Supply Industry average of 2.32%.
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Bottom Line
Adding to their defensive safety, reliable dividends are another reason investors seek utility stocks and National Fuel Gas Company, Primo Water, and Veolia Environnement are certainly attractive in this regard. More importantly, the favorable and improved growth trajectories of these top-rated utility stocks makes now an ideal time to buy with broader indexes near all-time highs.
With the S&P 500 and Nasdaq still near record highs now may be a good time to scope out utility stocks which can serve as defensive investments in case of an eventual correction.
Utility stocks are deemed defensive as electricity, water, and gas services are essential regardless of the broader economic conditions.
Seeing as their services have consistent and stable demand, it's noteworthy that three utility stocks were added to the Zacks Rank #1 (Strong Buy) list over the last week.
National Fuel Gas Company NFG
We’ll start with National Fuel Gas Company, an integrated energy company with natural gas assets in the prolific Appalachian basin along with oil-producing assets in California.
As a renowned natural gas distributor, National Fuel Gas is considered a Dividend King having increased its dividend for more than 50 years. NFG has a current annual dividend yield of 3.8% which easily tops the S&P 500’s 1.25% average and is roughly on par with its Zacks Utility-Gas Distribution Industry average.
Image Source: Zacks Investment Research
Furthermore, NFG currently trades at 10.6X forward earnings and at a pleasant discount to the S&P 500’s 23.5X and its industry average of 14X. Better still, annual earnings are expected to dip -2% this year but are forecasted to rebound and spike 15% in fiscal 2025 to $5.83 per share. This is accompanied by steady sales growth and NFG also checks the boxes in terms of key metrics like Return on Equity (ROE) and debt to capital.
Image Source: Zacks Investment Research
Primo Water PRMW
As a pure-play water solutions provider in North America and Europe, Primo Water’s stock is attractive with its increased profitability standing out in particular. Primo Water’s annual earnings are now projected to climb 53% in FY24 to $0.95 per share compared to $0.62 a share last year. Plus, FY25 EPS is slated to spike another 16%.
More intriguing is that earnings estimate revisions for FY24 and FY25 are up 8% and 3% over the last 60 days respectively and PRMW offers a very respectable 1.7% annual dividend yield which it has increased 13 times in the last five years.
Image Source: Zacks Investment Research
Veolia Environnement VEOEY
Rounding out the list is Veolia Environnement which is considered the only global company to offer the entire range of environmental services in the water, waste management, energy, and transportation sectors.
Veolia Environnement’s expansion is very enticing making its stock look cheap trading at $15 and just 7.3X forward earnings. To that point, annual earnings are expected to soar 207% this year to $2.18 per share versus $0.71 a share in 2023. Even better, FY25 EPS is projected to rise another 12%.
Total sales are expected to be up 8% in FY24 and are forecasted to increase another 2% in FY25 to $49.85 billion. The cherry on top is that VEOEY has a 2.79% annual dividend yield that tops the benchmark and the Zacks Utility-Water Supply Industry average of 2.32%.
Image Source: Zacks Investment Research
Bottom Line
Adding to their defensive safety, reliable dividends are another reason investors seek utility stocks and National Fuel Gas Company, Primo Water, and Veolia Environnement are certainly attractive in this regard. More importantly, the favorable and improved growth trajectories of these top-rated utility stocks makes now an ideal time to buy with broader indexes near all-time highs.
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