The recent stock market rally has many investors focused on the S&P 500 index, which recently made a new all-time high. The SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is up 5.3% in 2025. It’s been an impressive comeback after the index hit a 52-week low in April.
Technology stocks have largely fueled that rally. However, investors who bought utilities stocks may be enjoying more impressive gains than if they stayed concentrated in technology.
The Utilities Select Sector SPDR Fund (NYSEARCA: XLU) is up more than 7.7% this year. This was part of a flight to safety. Investors sought out these companies for their defensive qualities: consistent cash flows, regulated business models, and essential services. Investors also appreciate the additional benefit of reliable dividends that frequently have yields that outpace inflation.
As the second half of 2025 unfolds, utilities may not keep pace with technology stocks in a pure risk-on environment. However, for investors prioritizing steady income, lower volatility, and exposure to long-term energy transitions, here are three stocks to consider.
The Strengths of NextEra Energy Outweigh Short-Term Risks
The bull case for NextEra Energy Inc. (NYSE: NEE) centers around its two complementary business units. Florida Power & Light Company (FPL) serves more than five million customers in Florida. The company acts as a regulated utility providing electricity through a combination of natural gas, solar, and nuclear power.
NextEra Energy Resources is NextEra Energy's renewable energy arm. The company is one of the world’s largest solar and wind energy generators and provides energy storage and battery technologies.
However, that strength was under pressure as the tax and spending bill, working its way through Congress, may cut some renewable energy subsidies. However, those cuts may not be as bad as feared. Plus, NextEra Energy is well-positioned to benefit from the growth in electricity demand needed to power artificial intelligence data centers.
NEE stock is up just 0.5% in 2025. However, analysts give the stock a consensus price target of $84.55, a 17% increase. That pairs with a dividend with a 3.16% yield, increasing for 31 consecutive years.
American Electric Power Offers a Defensive Yield with Scale and Stability
Many investors think of American Electric Power (NASDAQ: AEP) when they think of utility stocks. The company’s footprint covers 11 states and more than 5.6 million customers. To support that footprint, AEP has the largest electricity transmission system in the country, spanning over 40,000 miles.
Investors celebrate the fact that 90% of the company’s revenue comes from its fully regulated operations. This stability contributes to reliable revenue and steady earnings.
Like many utilities, AEP has an eye to the future with a long-term strategic plan that emphasizes resilience, sustainability, and the integration of renewable energy technologies. The company has invested heavily in this area and carries long-term debt of around $45 billion. However, even with a debt-to-equity ratio of 1.42, the company’s predictable cash flow mitigates any concerns.
AEP stock is up 12.7% in 2025, and analysts believe that the company will report approximately 7% earnings growth in the next 12 months. This is in addition to a dividend that has increased for 15 consecutive years and has a 3.58% yield.
Even after its recent rally, AEP trades at around 17 times forward earnings, a modest premium to peers, reflecting investors’ confidence in its stability.
Dominion Energy’s Streamlined, Focused Business Model is Engineering a Comeback
Dominion Energy Inc. (NYSE: D) has been one of the worst-performing utility stocks in the last five years. It cut its dividend in 2020, and for the last two years, it’s been diligently working to sell its natural gas transmission business, write down assets, and reset the dividend.
The result is a streamlined company that now has 90% of its revenue coming from a regulated utility business.
That's showing up in D stock, which was down more than 30% in the last five years. However, it’s up 19.5% in the last 12 months and over 6% in 2025.
That has the stock approaching the consensus price target. However, analysts project earnings growth of around 6% in the next 12 months. Plus, after the company’s transition, it has an attractive valuation backed by a refreshed dividend that offers a yield of 4.67%.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
The article "3 Utility Stocks That Combine Income and Stability" first appeared on MarketBeat.
