9 Best Utility Stocks to Buy for 2021

 

Utility stocks: They're steady, they're dependable, they deliver income. That's the case with most of these top 2021 picks ... but a couple break the mold.

 

 

Utility stocks aren't exactly the most glamorous energy-related investment on Wall Street.

 

If you want dynamic energy stocks, solar energy and hydrogen fuel cell picks offer a ton more growth potential. Or if you want deep value investments, struggling Big Oil giants that are trading at a fraction of their value from a few years ago could be aggressive plays that pay off.

 

But utilities do offer one thing few other energy-related stocks can offer: unrivaled stability. After all, electricity is as much a necessity as food and water for the typical household in the 21st century. Furthermore, the highly regulated nature of the sector and lack of competition in most geographies adds a layer of predictability that you simply won't find in disruptive industries such as Big Oil or alternative energy.

 

 

Here are nine of the best utility stocks for 2021 if you're seeking stability and generous dividends to provide a stable backbone for your portfolio. While they probably will never make you a millionaire overnight, they are far less aggressive and will allow you to sleep soundly regardless of Wall Street volatility in the New Year.

 

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3 Utility Stocks With Tried-and-True Gains

 

These utility stocks remained resilient despite the effects of the pandemic

 

 

The utility sector comprises companies that provide essential products and services, including water, electricity, natural gas, sewage, and other services. The sustained demand for these services has helped utility stocks generate stable earnings.

 

Due to the reliability of earnings, these companies can effectively payout dividends at significantly higher average yields. Hence, the unmatched combination of income generation and profitability makes utility stocks an excellent low-risk option for investors.

 

This year, the utility stocks represented by the Utilities Select Sector SPDR ETF (NYSEARCA:XLU), have underperformed the broader market. The S&P 500 index grew 6% since the beginning of the year, while the Utilities ETF fell by nearly 2%.

 

 

Tech stocks have ruled the roost this year, but utility stocks’ importance in a well-rounded portfolio cannot be denied either. Therefore, let’s look at three utility stocks that remained resilient despite the effects of the pandemic.

 

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5 Utility Stocks to Buy for an Extra Durable Portfolio

These five utility stocks to buy should be able to rally so long as inflation remains checked

Utility stocks were supposed to be yesterday’s favorite investment. The theory regarding utility stocks was simple: Robust economic growth coupled with a full labor market was supposed to spark rising inflation. The Fed was supposed to fight rising inflation with rate hikes. Fixed income yields were supposed to rise. Utility stocks, which were long viewed as bond substitutes in an era of ultra-low interest rates, were supposed to fall.

But that theory hasn’t fully materialized into reality.

The result? Utility stocks haven’t lost their shine. With inflation relatively contained and investors ducking into safety, stocks in utilities are still attractive assets to own for dividend yield hunters. Utilities Select Sector SPDR Fund(NYSE: XLU), a utilities ETF, has jumped  13.5% in 2019.

The markets’ recent volatility has contributed to the XLU’s gain, as investors flee toward any safe haven. Not to mention, a number of other catalysts are in play. Inflation isn’t soaring higher because technology giants are suppressing inflationary pressures (just think about the downward pressure Amazon (NASDAQ:AMZN) is putting on all consumer goods prices). This trend won’t reverse any time soon, and thus, inflationary pressures should remain subdued for the foreseeable future. With those forces subdued, utility stocks have room to rally.

With that said, what are the best utility stocks to buy for your portfolio? Here’s a list of five stocks that I think are worth a look:

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5 Utility Stocks to Save From the Wreckage

Dip-buyers wary of volatility should consider more stable utility stocks

Utility stocks could become more popular soon. Amid the trading volatility of recent days, many of the stock market’s usual best performers made a hard turn downward. Such moves cause many investors to rethink their investing strategies. Instead of going for the stocks they believe will go up the furthest, they turn to more stable equities.

Utility stocks have become a common choice in such an instance. While they may see less stock price growth, they also tend to produce both profits and steady amounts of cash flow. Moreover, whether the economy booms or busts, people tend to keep paying their utility bills. This reinforces the stability of utility stocks.

Investors should also note that the Utilities Select Sector SPDR ETF (NYSEARCA:XLU), which tracks the utility sector, has risen by almost 3% so far in October. Not only have these stocks to buy not seen the effects of the October swoon, but they have also grown in value as other stocks retreated. Additionally, with their steady stream of cash flow, these companies will likely provide a stable source of dividend income.

Investors should find especially promising returns in the following companies:

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