Are you looking for dividend stocks to buffer against the ongoing tariff standoff? Only a few sectors can withstand these threats in today’s volatile market, not to mention aggressive trade policies. One of them is the utilities sector.
Companies in the sector are generally considered one of the most defensive groups due to their consistent demand and stable business model. After all, people will need power, water, gas, and more, regardless of economic turmoil. Plus, most utility stocks are famous for paying dividends, which helps investors sleep better as they wait for markets to cool down.
How exactly do you choose the right dividend stock? It comes down to choosing one that enhances your chances of return by selecting buy-rated companies.
So, today, let me show you the top-rated utility companies that pay dividends.
How I Came Up With The Following Dividend Stocks to Buy
I used Barchart’s Stock Screener tool to get the list using the following filters.
- Annual Dividend Yield: 0.01% and above. I wanted to limit the search to companies that pay dividends.
- Number of Analysts: 8 or more. I wanted more analysts following the stock, as this would increase my confidence in their assessment.
- Current Analyst Rating: 4.5 to 5 (Strong Buy).
- Watchlists: Utility Stocks. I like utilities due to their “recession-proof” qualities.
Here are the results from the screen, arranged from highest to lowest yields.
With that out of the way, let’s discuss each company, starting with number one:
Evergy Inc (EVRG)
Evergy Inc. is a utility holding company that provides clean, safe, and reliable electricity in Kansas and Missouri. Evergy produces up to 15,400 megawatts from various sources like coal, natural gas, nuclear, and renewable resources like solar and wind. The company has taken steps to lessen carbon emissions, with plans to reduce them by 70% by 2030 compared to a 2005 baseline. This improves its long-term viability, especially with much of the world moving towards greener energy sources.
The company pays an annual dividend of $2.67, translating to a yield of around 3.9%. Analysts also upgraded their rating from moderate to strong buy for EVRG stock. Its high target price is $78, which suggests as much as 14% upside.
NiSource Inc (NI)
NiSource Inc. is an Indiana utility that primarily distributes natural gas and electricity. The company currently serves 3.7 million customers in Indiana, Ohio, Pennsylvania, Maryland, Kentucky, and Virginia.
NiSource is currently the pioneer in integrating renewable natural gas (RNG) and hydrogen blending into its gas supply portfolio, positioning the company to achieve its sustainable goal of lowering its overall carbon footprint. The company partners with agriculture and landfill facilities to capture methane, convert it into RNG, and then supply it to their pipelines. This is one of several initiatives in their roadmap to achieve net-zero emissions by 2050.
The company's impressive record of dividend payments dates back to 1972, and today, NiSource pays $1.12 per share annually, which reflects a 2.8% yield based on current prices. 14 out of 15 analysts covering it are optimistic about NI stock, giving it a strong buy rating and a high target price of $46, which represents an 18% potential upside.
Vistra Energy Corp (VST)
Vistra Energy Corp., a Fortune 500 company, serves around 5 million customers from California to Maine. The company has a mixed energy portfolio totaling 41,000 megawatts, including natural gas, nuclear, coal, solar, and battery storage.
You may have noticed that Vistra has the lowest dividend yield on this list, at around 0.6% based on an 89.4-cent annual payout. And, you may have wondered why it's on this list. Well, Vistra has the highest 5-year dividend growth, at 74%, of all three companies. With a payout ratio of just 10.66%, the company can absolutely afford to continue increasing its dividend, as it has since starting to pay them in 2019.
VST stock has a strong buy rating and a $232 high target price from analysts, which suggests a 69% upside potential—again, the highest on this list. This goes to show that yield alone isn't everything; sometimes, a low-yielding dividend stock has a high upside potential!
Final Thoughts
These utility companies offer stability and a defensive position against the broader market's more volatile moves. They also provide excellent capital appreciation should things unfold as analysts anticipate. However, nothing in life is a sure thing (except health and taxes), which is why successful investors must be able to adapt to changes.
As always, do your due diligence, monitor new developments, and, if necessary, trim or eliminate losing positions. Chasing consistent growth over long periods is better than gambling with short-term volatility.
