The utility industry is widely exploring the integration of renewable energy systems into the grid, along with various grid modernization solutions. Amid such conducive trends, investors could consider looking into fundamentally sound utility stocks, UGI Corporation (UGI), Consolidated Edison, Inc. (ED), and NRG Energy, Inc. (NRG) with strong dividends.
Increasing energy demand in developing and developed countries, focusing on green energy generation, integration of new technologies, and increasing demand from the consumer end positively boost the utility market growth. Moreover, the generative AI in the utility market is witnessing growth as utilities recognize its potential to transform their operations.
Additionally, utilities are considered dividend stalwarts with a steady demand due to the nature of the products they offer. Considering these factors, let’s take a look at the fundamentals of the three utility stocks, beginning with the third one.
Stock #3: UGI Corporation (UGI)
UGI and its subsidiaries distribute, store, transport, and market energy products and related services internationally. The company operates through four segments: AmeriGas Propane; UGI International; Midstream & Marketing; and UGI Utilities.
In terms of the trailing-12-month gross profit margin, UGI’s 53.20% is 18.4% higher than the 44.95% industry average. Likewise, its 7.03% trailing-12-month Return on Total Capital is 74.5% higher than the 4.03% industry average. Furthermore, the stock’s 0.49x trailing-12-month asset turnover ratio is 123.9% higher than the 0.22x industry average.
UGI has paid dividends for 36 consecutive years. Its annual dividend is $1.50, which translates to a yield of 6% at the current share price. Its four-year average dividend yield is 4.41%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.6% over the past three years.
UGI’s total revenues for the fiscal third quarter, which ended June 30, 2024, amounted to $257 million. In addition, its adjusted net income attributable to UGI and adjusted EPS stood at $12 million and $0.06, respectively.
Analysts expect UGI’s revenue for the fourth quarter ending September 2024 to increase 17.6% year-over-year to $1.65 billion. It surpassed Street EPS estimates in each of the trailing quarters.
Shares of UGI have gained 9.3% over the past three months to close the last trading session at $25.02.
UGI’s POWR Ratings reflect its outlook. UGI has a B grade for Quality. It is ranked #17 among 59 stocks in the Utilities - Domestic industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Click here to access the additional UGI ratings (Momentum, Stability, Sentiment, Growth, and Value).
Stock #2: Consolidated Edison, Inc. (ED)
ED engages in the regulated electric, gas, and steam delivery businesses in the United States. The company invests in electric and gas transmission projects. It primarily sells electricity to industrial, commercial, residential, and government customers.
In terms of the trailing-12-month gross profit margin, ED’s 52.50% is 16.8% higher than the 44.95% industry average. Its 22.20% trailing-12-month EBIT margin is 4.4% higher than the 21.27% industry average.
ED’s annual dividend is $3.32, which translates to a yield of 3.2% at the current share price. Its four-year average dividend yield is 3.67%. Moreover, the company’s dividend payouts have increased at a CAGR of 2.2% over the past three years.
During the second quarter that ended June 30, 2024, ED’s total operating revenues increased 10.5% year-over-year to $3.22 billion. Moreover, its adjusted earnings were reported at $203 million and $0.59 per share.
Street expects ED’s EPS for the third quarter ended September 2024, to increase 1.1% year-over-year to $1.64. The company’s revenue is expected to increase 5% year-over-year to $4.06 billion for the same quarter. The company surpassed consensus EPS estimates in each of the trailing four quarters.
ED’s stock gained 2.5% over the past month to close the last trading session at $104.13.
ED’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Momentum. ED is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated ED for Sentiment, Growth, Stability, Value, and Quality. Get all ED ratings here.
Stock #1: NRG Energy, Inc. (NRG)
NRG operates as an energy and home services company in the United States and Canada. The company produces and sells electricity generated using coal, oil, solar, and battery storage; natural gas; and a cloud-based home platform, including hardware, software, sales, installation, customer service, technical support, and professional monitoring solutions.
NRG’s annual dividend is $1.63, which translates to a yield of 1.79% at the current share price. Its four-year average dividend yield is 3.28%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.9% over the past three years.
NRG’s trailing-12-month ROCE of 70.98% is 638.7% higher than the industry average of 9.61%. Its trailing-12-month ROTC of 9.84% is 144.2% higher than the 4.03% industry average.
For the fiscal second quarter that ended June 30, 2024, NRG’s revenues increased 4.9% year-over-year to $6.66 billion. The company’s non-GAAP net income and non-GAAP net income per common share grew 148% and 169.6% from the prior year’s period to $738 million and $3.37, respectively.
Analysts expect NRG’s revenue for the third quarter ended September 2024 to increase 15.1% year-over-year to $9.14 billion.
The stock has gained 34.6% over the past six months, closing the last trading session at $91.10.
NRG’s POWR Ratings reflect bright prospects. The stock has a B grade for Value, Growth, and Momentum. It is ranked #4 in the same industry.
In addition to the POWR Ratings highlighted above, one can access NRG’s ratings for Quality, Stability, and Sentiment here.
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ED shares were trading at $105.13 per share on Tuesday afternoon, up $1.00 (+0.96%). Year-to-date, ED has gained 18.62%, versus a 20.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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