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3 Utilities Picks for Dividend Seekers

Prices for the highest-quality utilities remain rich, but there are pockets of value to be found.

Utilities closed out 2020 as the second-worst-performing sector behind energy--and therefore entered 2021 with a much more attractive investment proposition from a valuation standpoint. In addition, the sector’s 3.3% average dividend yield remains exceptionally attractive relative to ultralow interest rates. Today we’re looking at three reasonably priced utilities stocks that our analysts like.

FirstEnergy's (FE) shares fell 30% in July 2020 and have not recovered following the arrest of the Ohio House Speaker and four others on racketeering charges. Although no FirstEnergy executives have been charged, and FirstEnergy no longer owns the entity that benefited from the alleged bribery, we expect it will have to repair regulatory and political relationships in Ohio, which represents less than 20% of earnings. FirstEnergy's underlying businesses are solid. As the bribery headlines and COVID-19 issues fade, we estimate 4.8% annual earnings per share and dividend growth.