Top 10 utility stocks to watch

Why buy utility stocks?

Utility stocks are some of the most popular buy-and-hold stocks on the market. This is because utility stocks often offer high dividends, and they tend to outperform other sectors in times of economic uncertainty.

Utility companies supply the daily energy and water needs of a large proportion of the world’s population. Different utility companies provide electricity, gas, and water – they’re also responsible for the maintenance of delivery systems and production hubs. Due to the societal need for energy and water, utility stocks will always likely be in demand.

There are a number of different options available for producing and supplying this energy, including renewables, nuclear power plants, hydro-electric and tidal power, as well as fossil fuels. But in the last decade or so, many utility companies have made an effort to shift their means of production away from fossil fuels to greener alternatives, after increased consumer awareness about the need to transition to cleaner forms of energy.

Different utility companies perform different functions, so it’s important to establish some definitions for the types of utilities:

• Energy generating companies: utility companies that produce or supply energy and water to customers
• Energy network operating companies: utility companies that operate energy grids and are responsible for matching the supply of energy or water with the current demand in a certain region
• Network maintenance companies: utility companies that are responsible for maintaining energy networks, wastewater networks, or sewage works. These companies can also include installation as part of their service

Often, the three different definitions can apply to a single entity – but it can also be the case that a company specialises in one of the above, or has subsidiaries to diversify their offering.

How to trade or invest in utility stocks

Follow the steps below to place a trade on utility stocks:

1. Research the company you’d like to trade or invest in
2. Choose whether to trade or invest
3. Create an account or log in
4. Take steps to manage your risk
5. Open, monitor, and close your position

Trading and investing are two different ways to take a position on a company’s stock. Investing is a way to take direct ownership of the company’s stock. If you own stock, you’ll receive dividends if the company pays them – you’ll also have voting rights if the company grants them and you’re eligible.

When investing, your maximum risk is capped at the cost of opening the position. You can invest in utility shares through our share dealing platform. With us, you’ll trade US shares commission-free, and pay as little as £3 per trade on UK stocks.*

Trading means that you’re speculating on the price of the stock rising or falling with financial derivatives like spread bets and CFDs. With these products, you won’t own the shares directly, so you won’t receive dividends if the company pays them.

When you trade with spread bets or CFDs, you’ll be opening your positions with leverage – which grants you full market exposure for an initial deposit. While this can help to bring down your initial outlay, it’s high risk and can amplify both your profits and your losses – so it’s important to take steps to manage your risk.

Learn more about shares trading

Past performance is not a guide to future performance.

What are the top ten utility stocks to watch?

The below list of utility stocks has been ranked in no particular order, but each company has significant holdings and operations in the utility sector. The shares have been selected for recent market news.

1. Dominion Energy
2. FirstEnergy
3. PPL Corporation
4. NextEra
5. Iberdrola
6. SSE
7. United Utilities
8. National Grid
9. Centrica
10. E.ON

Dominion Energy (NYQ:D)

Dominion is one of the largest utility companies in the US, operating in 16 states across the country. It’s headquartered in Richmond, Virginia, and it has a number of subsidiaries including PSNC Energy, Questar Corporation, and BrightSuite.

Dominion has a large focus on water, solar, wind, natural gas and biomass methods for generating electricity to meet the utility demands of its nearly 7 million customers. It reports that by 2050, the company will achieve net-zero greenhouse gas emissions across all its electric and natural gas operations.

Dominion Energy is listed on the New York Stock Exchange under the D ticker. The company is a component of the Dow Jones Utility Average (DJUA) and S&P 500 indices. The shares are down 12% this year and yield 5.3%.

FirstEnergy (NYQ:FE)

FirstEnergy is an American utility company based in Ohio. The company controls one of the largest investor-owned electric systems in the US, with more than 24,000 miles of transmission lines across the country and a total generating capacity of over 3500 megawatts.

FirstEnergy is made up of ten different regulated distribution companies, which together serve over 6 million customers in the American Midwest and Mid-Atlantic regions. These companies include Ohio Edison, The Illuminating Company, Penn Power, Mon Power and Jersey Central Power & Light.

FirstEnergy is listed on the New York Stock Exchange under the FE ticker. Plus, it's a component of the DJUA and S&P 500. The shares are down 7% this year and yield 4.5%.

PPL Corporation (NYQ:PPL)

PPL Corporation provides energy and utility services to approximately 3.5 million customers in the US. As with other utility companies on this list, PPL is committed to an increased use of renewable energy generation systems as part of their supply grid. To this end, the company has set a goal to achieve net-zero carbon emissions by 2050 and is targeting a 70% reduction from 2010 levels by 2035 and an 80% reduction by 2040.

PPL has more than 83,000 miles of electricity and gas lines across the US, as well as a total energy generation capacity of about 7500 megawatts. PPL is listed on the New York Stock Exchange under the PPL ticker and the company is an S&P 500 component. The shares are down 6% over the past 12 months and yield 3.8%.

NextEra Energy (NYQ:NEE)

Based in the US, NextEra generates more wind and solar energy than any other utility company, and in the last decade or so, the company has made a concerted shift towards renewable energy generation.

NextEra has a number of subsidiaries including Florida Power & Light, NextEra Energy Transmission, NextEra Energy Resources and NextEra Energy Services. The largest of the subsidiaries, Florida Power and Light, supplies electricity to more than 12 million Florida residents. It’s also the biggest energy company in the US as measured by retail electricity produced and sold.

NextEra is listed on the New York Stock Exchange under the NEE ticker. The company is a component of the DJUA, the S&P 100 and the S&P 500 indices. The shares are down 7% this year and yield 5.7%.

Iberdrola (BER:IBE1)

Formed in 1870, Spanish utility Iberdrola runs solar, electricity, gas, wind and nuclear energy operations in Spain, the UK, US, Mexico and Brazil. Its shares trade on the Spanish, Berlin and Stuttgart exchanges, among many others. In the UK it owns Scottish Power.

At the end of 2023, its renewable capacity stood at over 42,000 MW. It is currently working on 31 GW of new solar projects in Spain, US, Mexico, the UK, Portugal and Italy. It aims to increase its PV capacity to 14 GW installed by 2025. Last year it installed 20 new onshore wind turbines in Zamora, Spain and a hydroelectric plant is being built in Portugal. The shares currently yield 4.5% and are down 3% this year.

SSE (LON:SSE)

SSE is an energy and utility company headquartered in Perth, Scotland. SSE formerly stood for Scottish and Southern Energy, although following a rebranding in 2010 the company became known simply as SSE. In January 2020, it sold its retail business, SSE Energy Services to OVO Energy for a reported £500 million.

SSE is one of the Big Six utility companies in the UK, and it’s responsible for generating and supplying electricity and natural gas utilities to large areas of the UK and the Republic of Ireland. The company manages an energy distribution network in England and Scotland that serves more than 3.8 million homes and businesses.

SSE trades on the London Stock Exchange under the SSE ticker, and it is also a constituent of the FTSE 100. The shares are down 10% this year and yield 5.3%.

United Utilities (LON:UU.)

United Utilities is one of the largest publicly listed water companies in the UK, supplying drinking water and wastewater services to over 3 million homes and businesses in the Northwest.

Much of the company’s water supply comes from man-made lakes or reservoirs, which are mostly located in the British Lake and Peak Districts. Aside from supplying water to its customers, United Utilities also looks after the maintenance of its supply lines and manages any leaks in their network.

United Utilities is listed on the London Stock Exchange under the UU ticker, and it is a component of the FTSE 100. The shares currently yield 4.5% and are down 4% this year.

National Grid (LON:NG.)

National Grid is an energy company that operates in the UK. It’s responsible for ensuring that homes and businesses have access to the power they need, whenever they need it. In this capacity, National Grid is responsible for buying or selling energy depending on demand levels in the UK.

National Grid also has operations in the north-eastern US, meeting the electricity and gas utility needs of over 20 million customers in Massachusetts, New York, and Rhode Island.

National Grid trades under the NG ticker, with a primary listing on the London Stock Exchange. It has a secondary listing on the New York Stock Exchange (NYSE), where it trades under the ticker NGG. The company is a component of the FTSE 100. The shares are down 7% this year and yield 5.4%.

Centrica (LON:CNA)

Centrica owns British Gas. The company is listed under the CNA ticker on the London Stock Exchange. In 2022, it was promoted from the FTSE 250 to the FTSE 100. It’s the largest supplier of natural gas utilities to domestic UK customers, and it’s also one of the UK’s largest electricity suppliers.

British Gas was privatised in 1986, following the approval of the Gas Act. Since being acquired by Centrica in 1997, British Gas has continued to provide utility services across the UK, serving more than 11.6 million homes. This makes British Gas the UK’s biggest energy supplier and one of the Big Six utility companies in the country. The shares are up 155% this year and yield 3%.

E.ON (EOAX.N:GER)

E.ON supplies is one of the UK’s leading utility companies. It’s also one of Europe’s largest operators of energy networks, and it serves approximately 50 million customers globally. E.ON is headquartered in Essen, Germany – and it trades under the EOAN ticker on the Frankfurt Stock Exchange.

As with other utility companies on this list, E.ON is making an effort to move towards green energy solutions, including shifting to more sustainable forms of energy generation such as wind farms, solar power and biomass.

E.ON’s renewable project is so well-established that by the end of 2019, the company had moved all its British customers onto renewable forms of electricity. This made E.ON the first of the UK’s Big Six utility companies to make this transition. The shares have risen 4% this year and yield 4.2%.

How to identify the best high dividend yield utility stocks

Some companies will pay dividends to investors, which can help to boost the long-term profitability of an investment position. Higher dividend yields are favoured by investors as they can imply greater returns on an initial investment, depending on the size of the position. Utility companies often have attractive dividend yields. To calculate the dividend yield, you would divide the annual dividend by the share price.

Companies can often change their dividends depending on their financial performance. A number of factors can influence this, including the current economic outlook and how well a particular sector is doing. But utility companies tend to perform well when other companies might feel greater pressure in times of economic uncertainty.

Utility stocks: what you need to know before investing

The most important thing to know before you invest in utility shares is that they tend to perform better than other stocks in times of economic uncertainty.* As a result, many investors will have utility shares in their portfolios – either as a hedge against downward movements in their other positions, or as an outright long term buy-and-hold investment.

*Past performance doesn’t guarantee future results.

Utility shares summed up

• Utility shares are some of the most popular shares that investors use as part of a buy-and-hold strategy
• Utility stocks often pay high dividends, and are usually in demand due to the societal need for energy and water
• Different utility stocks provide different services, including the supply of electricity and water to customers and the maintenance of their delivery networks
• Utility stocks tend to perform comparatively well during times of economic uncertainty, when stocks from other sectors might be expected to underperform or decline in value
• Aside from investing in utility stocks outright, you can also use financial derivatives to speculate on their price rising or falling

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.

*Based on revenue excluding FX (published financial statements, October 2021).