US utility stocks are investors’ traditional favorites because of their slow, stable stock price movements and steady dividends. However, in the last few years, these stocks haven’t given only fair dividend growth, but they have also offered a significant capital appreciation. Rising interest rates couldn’t deter utility stocks in the last couple of years.
In the last three years when interest rate normalization started gaining ground, returns of the Utilities Select Sector SPDR ETF (XLU), including dividends, came in at 13.0% compounded annually, while the broader markets (SPY) returned 9.0% compounded annually in the same period. Consequently, increasing interest rates might not significantly impact the utilities sector going forward.
Renewables giant NextEra Energy (NEE) has a rather attractive potential gain of 5.0% going forward. It has a mean price target of $155.57 against its current market price of $148.26. Better-than-expected quarterly earnings largely drove NextEra Energy’s rally in the last few years. As the fastest-growing utility in the sector, NextEra Energy stock has managed to rise nearly 23.0% in the last year.
Southern Company (SO) stock has shown a decent uptrend in the last month or so. It has a mean price target of $50.94 against its current market price of $50.20. That implies an estimated rise of 1.5%.
According to the Wall Street analyst consensus, Duke Energy (DUK) has a mean price target of $86.13, which implies a possible fall of nearly 2.0%. Duke is currently trading at $87.78.
Dominion Energy (D) has an estimated gain of just 1.1% going forward. It has a mean price target of $80.13 against its current market price of $79.24.
To learn more about US utilities and how the industry works, read Powering Up: All You Need to Know about Utilities.