3 high-yielding utility stocks with safe dividends

Investors usually buy utilities supplies for security and dividends. In fact, utility stocks have often been labeled “widow and orphan” stocks because of their consistency and reliable dividend payouts year after year.

With the ongoing war in Ukraine, rising inflation and the possibility of a US recession, now is a good time for risk-averse investors to consider adding utilities to their portfolios.

These three utility stocks have dividend yields above S&P 500 averages, as well as the ability to maintain its dividends even during a recession.

WEC	WEC Energy Group	$107.05
BKH	Black Hills Corp.	$78.64
NO	NextEra Energy	$88.82

Utility stocks to buy: WEC Energy Group (WEC)

WEC Energy Group (NYSE:WEC) provides electric, gas, and steam service to customers in Wisconsin, and gas service to customers in Illinois, Minnesota, and Michigan. In total, WEC Energy Group provides services to 1.6 million customers. The company has also invested nearly $600 million in non-profit wind projects over the past two years.

WEC Energy Group has a five-year capital plan that includes the investment of 1,800 megawatts of wind, solar and battery storage to be added to the company’s regulated asset base in Wisconsin. The company’s annual revenue is just over $8 billion.

In the second quarter of 2022, the company reported revenue of $2.13 billion, up 27% year-over-year and beating estimates by $370 million. Earnings per share (EPS) of 91 cents also beat by 6 cents per share. In addition, WEC increased its full-year earnings guidance and now expects earnings per share in the range of $4.36 to $4.40 (compared to initial guidance of $4.29 to $4.33).

As a utility company, WEC Energy Group is likely to remain profitable even during a recession, as customers tend to prioritize gas and electric bills. Earnings per share increased during the last recession, rising nearly 13% from 2007 to 2009. The company is able to recoup spending on infrastructure upgrades through the customers it serves. WEC Energy Group’s expansion into renewable energy sources such as wind farms could help growth due to the potential for higher returns on investment.

WEC Energy Group grew its earnings per share at a rate of 6.4% per year from 2012 to 2021. Investors can continue to expect the company to grow earnings per share by mid-single digits on a percentage basis each year, which can be attributed primarily to increased revenue and returns from non-performing investments. The dividend has increased by 5.3% over the past five years.

WEC has increased its dividend for 19 consecutive years. The last increase was a 7.4% increase in December 2021. The expected dividend payout ratio for 2022 is 67%, which is relatively low for a utility company. WEC Energy Group has a target payout ratio of 65% to 70%. WEC stock currently yields 2.7%.

Black Hills Corp (BKH)

Black Hills Corp (NYSE:BKH) is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Black Hills was founded in 1941 and is headquartered in Rapid City, South Dakota.

In the second quarter of 2022, Black Hills reported quarterly revenue of $474 million, up 27% year-over-year and $79 million above analyst estimates. Earnings per share of 52 cents beat estimates by 12 cents per share. The company reaffirmed its full-year guidance and expects 2022 earnings per share in the range of $3.95 to $4.15.

Black Hills’ growth in the coming years will largely be driven by price reviews that drive revenues and profits per kilowatt hour (kWh). Another factor is the expansion of the company’s existing assets with new communal infrastructure. Black Hills regularly adds new projects to its growth investment backlog, which currently stands at $2.7 billion for the 2020-2024 timeframe.

Black Hills’ planned growth investments include new electric transmission lines and new natural gas pipelines to serve its customers. The rate reviews will allow Black Hills to recoup its investment in its existing systems, more or less guaranteeing an increase in revenue, which should lead to future rising profits.

The company pays out about 60% of its net profit in the form of dividends. Its five-decade history of dividend growth gives investors assurance that a dividend cut by this utility company is unlikely. Demand for electricity and gas is not very cyclical, although it depends to some extent on weather conditions.

Black Hills should remain profitable in most cases. The fact that customers tend to stay with their provider means that Black Hills has a relatively stable business model. The company should also be able to weather future recessions well. This creates appeal for more conservative investors.

Black Hills has increased its dividend for 50 consecutive years, making it one of the exclusives Dividend kings list. BKH stock is currently yielding 3.1%.

Utility Stocks to Buy: NextEra Energy ( NEE )

NextEra Energy (NYSE:NO) is an electric utility company with three operating segments, Florida Power and Light, NextEra Energy Resources and Gulf Power. FPL and Gulf Power are rate-regulated electric utilities that together serve more than 5.7 million customer accounts and support more than 11 million Florida residents, while NEER is the largest wind and solar generator in the world.

NEE generates about 70% of its revenue from its electric companies, while the rest comes from NEER. NextEra Energy reported its financial results for the second quarter of 2022 on July 22. For the quarter, the company reported revenue of $5.18 million, which translated to an adjusted profit of $1.59 million (up 14.2% year-over-year before).

On a per-share basis, adjusted earnings rose 14.1% to 81 cents. As a result of further investment, FPL posted an 11% increase in earnings per share. In addition, strength continued for NEER’s existing renewables and storage portfolio, with adjusted EPS up more than 20%. It also added about 2,035 net milliwatts (MW) of renewable energy to its backlog. The backlog now stands at about 19,600 MW.

For the first half of the year, revenue rose 5.5% to $8.07 million and adjusted earnings per share rose 11.6% to $1.54. Management raised its adjusted EPS range for 2022 to $2.80-$2.90.

Between 2012 and 2021, NextEra Energy grew its earnings per share by an average of 9.3% per year. The company’s future growth will be generated through organic investments and acquisitions. Its renewable energy projects should drive the segment’s profits going forward. NEE predicts that its adjusted earnings per share will grow by 6-8% annually through 2025.

NextEra Energy has increased its dividend for 26 consecutive years, making the stock a dividend aristocrat. NEE shares yield 1.8%.

As of the date of publication, Bob Ciura had no positions (directly or indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer and are the subject of InvestorPlace.com Publishing Guidelines.