3 High-Yield Dividend Utility Stocks to Buy Now

Volatility has returned to the stock market. In an uncertain environment like this, many investors are looking for stocks that are crisis-proven and have a high likelihood of maintaining their dividends.

Utilities can be a good industry to look for such stocks, as electricity and gas demand is not very cyclical, and generally holds up well even during major economic downturns, as customers still need electricity.

The following three utility stocks have safe dividends in any economy, and we expect each to generate total returns above 10% over the next five years.

Say Yes to AES

The AES (Applied Energy Services) Corp. AES was founded in 1981 as an energy consulting company. In 1991, AES listed on the NYSE under the ticker symbol AES and then expanded globally in 1992. The corporation now has businesses in 14 countries and a portfolio of approximately 100 power plants and wind and solar farms. 

AES produces power through various fuel types, such as gas, renewables, coal, and oil/diesel. The company has nearly 35,000 Gross MW in operation. In 2023, AES produced nearly $13 billion in revenues. AES corporation is headquartered in Arlington, Virginia and has a market capitalization of $12 billion. 

AES reported second-quarter results on August 1. Adjusted EPS soared 81% to $0.38 for Q2 2024. The company constructed and acquired 1.6 GW of renewable energy year-to-date, and is on course to add 3.6 GW of new projects online in 2024. 

Leadership expects to achieve the high end of its 2024 guidance for adjusted EPS of $1.87 to $1.97 for the full year. Additionally, the company reaffirms its expectation it can grow EPS on average 7% to 9% through 2025 from a base year of 2020. It also still expects annual EPS growth of 7% to 9% from 2023 through 2027.

The company is actively engaged in developing and acquiring new energy projects; it currently has a backlog of 12.6 GW of renewables. AES expects to complete the majority of this backlog of projects over the next three years, but as it continues expanding, new projects could push this date out.

In May 2024, it announced the sale of AES Brasil which will fetch AES approximately $640 million of proceeds it will use to invest in renewables and U.S. utilities. Management targets 10% CAGR in U.S. Utilities rate base and is also forecasting 7% to 9% annual adjusted EPS growth through 2027. We see AES growing adjusted EPS at 7% on average over the next five years.

AES has grown the dividend ever since it was instated at $0.08 in 2012, for a total of eleven years to date. The dividend has grown 10% per year on average since 2014, and 5% per year on average in the past five years. 

AES stock currently yields 4.1%.

Rose City Dividends

Portland General Electric POR is an electric utility based in Portland, Oregon, providing electricity to more than 930,000 customers in 51 cities. The company owns or contracts more than 3.5 gigawatts of energy generation, between gas, coal, wind & solar, and hydro.

In 2023, the corporation generated $2.9 billion in revenue. The utility company is diversified by customer, with 37% of retail deliveries going to residential customers, 34% to commercial clients, and 29% to industrial clients. The company is forecasting that 80% of its power delivered to customers by 2030 will be carbon free, and 100% carbon free by 2040.

Portland General reported second-quarter 2024 results on July 26. The company reported net income of $72 million for the quarter, equal to $0.69 per diluted share on a GAAP basis, compared to $0.39 in Q2 2023. Retail energy deliveries in H1 2024 decreased 1.5% compared to the same prior year period, but wholesale energy deliveries soared 55%.

As a result, total energy deliveries grew 9.4%. Leadership reaffirmed its 2024 full-year guidance for adjusted earnings per share of $3.08 at the midpoint based on a series of assumptions, most notably a 2.5% increase in annual energy deliveries.

Portland General’s payout ratio has remained within or below its target payout ratio of 60% to 70% for most of the last decade. Going forward, we estimate that Portland General will likely remain within its target payout ratio as the dividend grows in line with earnings-per-share.

POR has increased its dividend for 18 consecutive years. On April 19, 2024, Portland General Electric announced a 5% increase in the quarterly dividend to $0.50 per share. POR has a safe dividend with a projected 2024 payout ratio of 65%.

POR stock currently yields 4.3%.

On Wisconsin

Alliant Energy Corp. LNT is a public utility holding company incorporated in Madison, Wisconsin, in 1981. In 2022, Alliant Energy generated $4.0 billion in operating revenues. The company serves approximately 970,000 electric and 420,000 natural gas customers.

The company consists of three subsidiaries. The first is the largest, Interstate Power and Light Company (IPL), which is a public utility that generates and distributes electricity and distributes and transports natural gas in Iowa. 

The second subsidiary is Wisconsin Power and Light Company (WPL), which provides similar services to IPL in southern and central Wisconsin. The last is Corporate Services, which account for a tiny percentage of the company's total earnings.

On August 1, Alliant Energy reported second-quarter results for 2024. The company's GAAP EPS for the quarter stood at $0.34, down from $0.64 in 2023, while its non-GAAP EPS was $0.57, also lower than the previous year’s $0.64. 

The decline in earnings was mainly due to a $60 million pre-tax non-cash charge related to the retirement of IPL's Lansing Generating Station.

We expect earnings to continue to grow at a modest rate of 6%, giving us an estimated EPS of $4.09 for 2029. The company has also been very consistent with its dividend policies. LNT has been growing dividends for the past 21 years. In the last ten years, dividend growth has averaged 6.9% annually.

LNT currently yields 3.4%.

At the time of publication, Ciura had no positions in any stocks mentioned.