3 Dividend-Paying Utility Stocks for a Defensive Portfolio

Stocks to buy

Are you looking to invest in dividend-paying utility stocks? You’ve come to the right spot!

Investing in dividend-paying utility stocks can be a great way to generate passive income. That’s because these utility stocks can be an ideal source of passive income for those looking for steady and predictable returns. These companies provide essential services such as electricity, gas, and water that are integral to our daily lives, making them a reliable investment choice.

They also have a long history of paying generous dividends, and offer investors the opportunity to earn a steady income with relatively low risk. Indeed, investing in dividend-paying utility stocks can be a great way to diversify your portfolio and generate long-term wealth.

This article will comprehensively analyze and discuss three top dividend-paying utility stocks. These stocks have consistently paid out reliable dividends for years and offer a great way to diversify income streams.

I will look at their dividend yields, growth prospects, and other factors to give an unbiased overview of each stock. So, without further ado, let’s look at these three utility stocks that offer impressive dividends.

AWK American Water Works $148.25
NEE NextEra Energy $74.85
EIX Edison International $67.00

American Water Works (AWK)

Source: Dmitrii Pridannikov / Shutterstock.com

Dividend-paying utility stocks are an excellent way for investors to diversify their portfolios and generate steady income. American Water Works (NYSE:AWK) is one of the leaders in this regard in the U.S., with a long history of paying out dividends to its shareholders.

On Feb. 15, American Water released its earnings report for the fourth quarter. This included GAAP earnings per share of 81 cents, beating analysts’ estimates by one cent, and total revenue of $931 million, which represented a decrease of 2.1% year-over-year, but still exceeded Wall Street forecasts by an impressive $7.26 million.

Furthermore, the public utility company reported closing on 26 regulated water and wastewater system acquisitions in 2022. This resulted in an extra 70,000 customer connections worth $0.3 billion as an investment.

Overall, the company’s earnings performance is impressive. It is the fourth time in a row that American Water Works has beat Wall Street consensus estimates.

However, despite this excellent performance, the stock is down almost 3% this year. The reason? The company’s policy of expanding via acquisitions could lead to increased from rising interest rates and higher input costs (for chemicals and other inputs). This outlook has clearly unsettled potential investors.

Nevertheless, federal support for water infrastructure, accompanied by organic growth through acquisitions and improved profit margins, is predicted to be a positive factor for American Water Works.

American Water Works is an excellent choice for those hoping to invest in utilities. There are some short-term headwinds. But the long-term picture is clear for this one.

NextEra Energy (NEE)

Source: madamF / Shutterstock.com

With its commitment to sustainability, NextEra Energy (NYSE:NEE) has become one of the world’s most significant wind and solar energy providers. The company offers various services, including electricity generation, transmission, distribution, and storage.

NextEra Energy is also involved in research and development initiatives. Through its continued efforts to provide reliable and affordable renewable energy to customers around the globe, NextEra Energy has become an industry leader in delivering clean energy solutions.

NextEra’s huge portfolio and breadth of operations offer a certain level of stability. Plus, its experience in solar and wind projects gives it the edge over competitors looking to capitalize on the benefits of the Inflation Reduction Act.

Recently, NextEra Energy saw its stock nosedive following its earnings repot. The company’s EBITDA did not meet Wall Street projections in the company’s fourth quarter. Additionally, the head of its Florida Power & Light utility announcing his retirement. This was on top of a press release that had to be put out, to refute claims that the company had broken any campaign finance laws in Florida.

Sentiment perked up somewhat after NextEra declared a quarterly dividend of $0.4675/share, which is 10% higher than the previous payout of $0.4250. Shares are still down almost 10% this year, though.

Altogether, NextEra Energy is one of the largest utility companies in North America, offering offers investors an attractive yield of 2.5%. It also is well-positioned to take advantage of growth opportunities in the future. With its low-risk profile, NextEra Energy is an ideal option for investing in dividend-paying utility stocks.

Edison International (EIX)

Source: Shutterstock

Edison International (NYSE:EIX) is pushing to have 100% carbon-free electricity within California by 2045. The company believes increased capital expenditure in electric-led clean energy sources will help grow its business.

It is the parent company of Southern California Edison and Edison Energy, which provide electricity to over 15 million people in Southern California. The company aims to provide its customers with sustainable and reliable energy solutions.

Through its subsidiaries, Edison International provides electricity generation, transmission and distribution services, and energy efficiency programs designed to reduce customer costs and improve their quality of life.

Based in Rosemead, California, the public utility holding company is in impressive financial condition, exceeding analyst predictions for the last four consecutive quarters. The company also pays a dividend of 74 cents, which translates into a juicy yield of 4.4%.

Edison International is setting itself up for multiple years of growth moving forward. The company’s primary overhead lines are now equipped with insulated conductors on 4,300 miles of wire, and it plans to increase this number to 8,600 miles by 2028.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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