7 Best-Performing Utility Stocks of March 2023

Utilities provide heat, water and other services to homes, schools and businesses. Because utilities are a necessity, stocks in this sector are 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 more stable than other sectors.

Here are seven of the best-performing utility stocks. Looking at a stock’s five-year return can help give you an idea of its stability (though past performance never indicates future performance).

Just because a utility stock is performing well now doesn’t mean it will perform well in the future. But one way to gauge the health of a stock is through its market capitalization, or market cap, which is the total value of a company’s shares of stock. High market caps can indicate stability.

Here are the top three utility stocks by market cap, with their five-year average returns included. All three of these companies offer dividends, though the rate can fluctuate.

NextEra Energy is the world’s largest utility company, generating the most wind and solar energy of any utility. NEE owns the Florida Power & Light Co., which is the largest electric utility company in the U.S. and supplies electricity to over 12 million people. NEE also owns NextEra Energy Resources LLC, which is the world’s biggest renewable energy generator. NEE owns seven commercial nuclear power plants and has been recognized by several third parties as a global leader in sustainable energy.

Duke Energy Corp.’s electric utilities serve 8.2 million customers, and its natural gas unit serves 1.6 million customers. DUK is working to transition to clean energy and is aiming for a 50% carbon reduction from electric generation by 2030 and net-zero carbon emissions by 2050. DUK is exploring new avenues in sustainable energy such as hydrogen and advanced nuclear.

Southern Co. offers several energy sources, including electricity, natural gas, solar power, wind power, carbon-free nuclear, battery storage and microgrids, and it also invests in a fiber-optics network and telecommunications services. SO has a goal to reach net-zero emissions by 2050.

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.

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.

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.

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.

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.

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^[0]

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.

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.

To find the best-performing utility stocks, we screened stocks available on the New York Stock Exchange that are included in the “Utilities” industry. These include independent power producers, diversified utilities and regulated electric, gas and water utilities.

To find the largest utility stocks by market cap, we used Morningstar data.