7 Best-Performing Utility Stocks of September 2024 - NerdWallet (2024)

Utilities provide heat, water and other services to homes, schools and businesses. Because utilities are a necessity, stocks in this sector may be less susceptible to economic downturns. Some utilities pay out dividends, supplying investors with additional income. Many utilities are regulated by federal or municipal governments, making them potentially more stable than other sectors.

Best-performing utility stocks

Here are seven of the best-performing utility stocks, though past performance never indicates future performance.

Source: Finviz. Data is current as of Sept. 3, 2024, and is intended for informational purposes only, not for trading purposes.

Utility stock pros

Regular dividends

Consistently paid dividends are a big advantage of utility companies. Check out a company’s dividend-paying history to get a sense of how stable those payments are.

Diversification

Adding utility stocks may help you diversify your portfolio. Diversification is an investment strategy that entails investing in a variety of investments across sectors, company sizes and geography. A well-diversified portfolio can help reduce risk: If one company or sector is performing poorly, the other investments may help buoy your overall portfolio.

Stabilization

Because utilities are a necessity, they may act as a stabilizing force in otherwise turbulent markets. Utilities outperformed the larger market ahead of the 2001 and 2007-2009 recessions. Utilities also performed well throughout 2022 despite recession concerns.

» More on preparing for a recession: What are the closest things to recession-proof stocks?

Utility stock cons

Changing landscape

Though the shift to clean energy creates a big opportunity for the energy sector, it presents some challenges as established companies try to venture into new technologies. Businesses will also need to cope with changing government regulations. There will likely be some companies that aren’t able to rise to the challenge of going green.

Environmental concerns

For the companies that don’t heavily shift toward clean energy (and even for those that do), environmental concerns are becoming increasingly important to investors. Environmental, social and governance, or ESG, criteria are being used more widely to assess a company’s climate risk and impact. Some sectors can easily skirt those concerns, but utility companies may be under tougher scrutiny.

Low growth

Utility stocks’ dividends are dependable and consistent — but these stocks don’t often present huge opportunities for growth. Instead, utilities provide steady income, making them attractive to some investors. That being said, with clean energy and electric cars becoming more mainstream, some analysts predict utilities becoming more of a growth sector over time.

How to buy utility stocks

To purchase any stocks, you’ll need to open an investment account. Investment accounts come in many forms. Some, such as retirement accounts like Roth or traditional IRAs, offer tax benefits. Taxable brokerage accounts do not, but they offer more flexibility.

Once you know what type of investment account you want to open, you’ll need to find an online broker at which to do so. Some brokerages have cheaper fees than others; some have advanced investment analysis. (Learn how to weigh these factors and choose the best online broker.)

After you have an investment account, you can fund it just like a bank account. From there, you’ll be able to use your broker’s screening tools to find utility stocks to invest in.

Energy ETFs: An easier way to invest

If buying individual utility stocks seems risky or challenging, you can consider energy exchange-traded funds, or ETFs. These funds are baskets of stocks and other investments you can buy together, providing instant diversification. Energy ETFs contain investments focused on energy creation, production and distribution. Keep in mind that while ETFs are more diversified than individual stocks, they are not without risk and their value can still fluctuate.

Methodology

To find the best-performing utility stocks, we screened U.S. companies that are included in the "Utilities" sector. These include independent power producers, diversified utilities and regulated electric, gas and water utilities.

Neither the author nor editor held positions in the aforementioned investments at the time of publication.