Fundamentally, utility stocks represent viable investment ideas because of their natural monopolies. In other words, because of their steep barriers to entry, would-be competitors don’t even try to compete. That allows utilities to rest on their laurels while generating predictable revenues. However, political and ideological pressures force this sector to consider renewable energy implementation. For one thing, a consensus of scientists agree that climate change imposes a detrimental impact on our planet. Therefore, utility stocks probably won’t enjoy a perpetual continuation of business as usual. Instead, their underlying enterprises must embrace, encourage and integrate green energy solutions.
Second, geopolitical flashpoints point to the urgency of critical resource diversity. Sustainable and/or green energy represents a key component of adapting to a new paradigm. Therefore, it’s well worth investors considering the top utility stocks with renewable energy potential.
| NEE | NextEra Energy | $78.99 |
| BEP | Brookfield Renewable | $31.30 |
| DNNGY | Orsted | $29.80 |
| SRE | Sempra Energy | $156.80 |
| DUK | Duke Energy | $98.36 |
| D | Dominion Energy | $57.71 |
| EXC | Exelon | $43.22 |
Utility Stocks: NextEra Energy (NEE)
As one of the top green and renewable infrastructure firms, NextEra Energy (NYSE:NEE) seems somewhat of a “cheat” when discussing the top utility stocks with renewable energy potential. After all, it already leverages incredible wind and solar networks. Fair enough. However, that doesn’t mean the company can’t invest further, thereby expanding its go-green credibility.
According to its website, NextEra invests heavily in innovative battery storage technology, low-emissions natural gas generation, safe and emissions-free nuclear power, industry-leading energy efficiency programs and efficient transmission lines. In particular, the low-emissions natural gas initiative should be intriguing because as great as wind and solar are, they represent intermittent resources.
Financially, NextEra makes for an intriguing opportunity among utility stocks because of its consistent profitability. According to Gurufocus, the company features a net margin of 19.79%, ranked better than nearly 85% of sector players. Finally, Wall Street analysts peg NEE as a consensus strong buy. Their average price target comes out to $93.55, implying nearly 19% upside potential.
Utility Stocks: Brookfield Renewable Partners (BEP)
Another top player in the renewable energy space, Brookfield Renewable Partners (NYSE:BEP) consistently ranks as one of the most popular utility stocks to buy. Featuring a robust portfolio of hydroelectric plants, wind farms and solar facilities, Brookfield carries significant clout. In addition, the company features four energy storage facilities. Since the beginning of this year, BEP gained 19% of equity value.
Last year, Brookfield Renewable and its institutional partners formed a strategic partnership with nuclear energy specialist Cameco (NYSE:CCJ). Of course, nuclear power unfortunately suffers from a controversial narrative. However, a truly sustainable infrastructure of green energy cannot exist without nuclear power, in large part because it’s the most reliable energy source. Financially, Brookfield Renewable may attract investors because of its stout operational stats. For example, its three-year revenue growth rate stands at 14.4%, beating out 63.79% of other utility stocks.
Lastly, covering analysts peg BEP as a consensus moderate buy. Their average price target lands at $34.95, implying over 13% upside potential.
Utility Stocks: Orsted (DNNGY)
Although an enticing opportunity among utility stocks, Orsted (OTCMKTS:DNNGY) might not be the most recognizable entity stateside. Based in Denmark, Orsted is a multinational power company which represents the world’s largest developer of offshore wind power by number of built offshore wind farms. Despite its relevancy, DNNGY slipped 6% since the start of the year. Also, in the past 365 days, it’s down nearly 27%.
Nevertheless, contrarian investors seeking the top utility stocks with renewable energy potential should take a close look at DNNGY. According to Precedence Research, the global offshore wind energy market reached a value of $27.33 billion in 2021. However, experts project that by 2030, the segment could be worth $129 billion. That would translate to a compound annual growth rate (CAGR) of 18.82% between 2022 to 2030.
Financially, Orsted’s greatest strengths lie in its operational prowess. Per Gurufocus, its three-year revenue growth rate pings at 28.6%, outpacing 80.75% of other utility stocks. Presently, no one actively covers Orsted. However, that could change in a few short years.
Sempra Energy (SRE)
Ranking among the top utility stocks, Sempra Energy (NYSE:SRE) enjoys a lucrative market. Headquartered in San Diego, Sempra has its tentacles firmly in large portions of Southern California. Fundamentally, you couldn’t ask for a better region. Yes, the Golden State attracts a lot of partisan criticism for going “woke.” However, it’s hardly broke in the pejorative sense, thus contradicting the meme. In fact, it’s the biggest economic engine of the U.S.
According to its website, Sempra invests in new energy technologies. It also claims to play an important role in the future of energy. I’m not entirely sure what all its word salad entails. However, SRE would certain stand among the top utility stocks with renewable energy potential. Basically, by going green, it may help reduce expenses for consumers. In turn, more people may be inspired to come to the Golden State, driving this economic engine even further.
Turning to Wall Street, analysts peg SRE as a consensus moderate buy. Their average price target stands at $168.13, implying a little over 7% upside potential.
Duke Energy (DUK)
Based in North Carolina, Duke Energy (NYSE:DUK) is one of this country’s largest energy holding firms. Its electric utilities serve 8.2 million customers, according to its website. This consumer base covers the Carolinas, Florida, Indiana, Ohio and Kentucky. Fundamentally, it rates as one of the best utility stocks because of millennial migration trends. Basically, Duke positioned itself to where young people are moving, boding well for long-term demand.
Moreover, the company has committed to a sustainable future. In that respect, Duke features a network of solar and wind energy facilities. It also began operations in the Carolinas as a hydroelectric power operator. Further, DUK ranks among the top utility stocks with renewable energy potential because ideologically, its green energy initiatives will align with what matters most to young people. Financially, Duke features modest strengths, which isn’t all that unusual for utility stocks. However, it does distinguish itself through consistent profitability. Looking to the Street, analysts peg DUK as a consensus moderate buy. Their average price target hits $108.13, implying 10% upside potential.
Dominion Energy (D)
Another top player among utility stocks, Dominion Energy (NYSE:D) calls Richmond, Virginia home. According to its public profile, Dominion supplies electricity in parts of Virginia, North Carolina and South Carolina and supplies natural gas to parts of Utah, Idaho and Wyoming, West Virginia, Ohio, Pennsylvania, North Carolina, South Carolina and Georgia. Despite its wide reach, D stock slipped 9% since the January opener.
Alongside its core operations, Dominion earnestly invests in its renewable energy projects. Fundamentally, this initiative aligns with the sensibilities of millennials and the emerging Generation Z cohort. Since their purchasing power will expand, their opinions matter – simple as that. Also, by continuing to invest in green energy, Dominion can diversify its grid. Notably, the market prices D stock at a forward multiple of 14.49. As a discount to projected earnings, Dominion ranks better than 64.89% of other utility stocks. Overall, analysts peg D stock as a consensus hold. However, Dominion’s coverage map and its undervalued nature makes it one of the top utility stocks with renewable energy potential.
Exelon (EXC)
A public utility, Exelon (NASDAQ:EXC) is headquartered in Chicago, Illinois. Per its public profile, Exelon is the largest electric parent company in the U.S. by revenue. It’s also the largest regulated electric utility in the nation with approximately 10 million customers. Thanks to its reach, EXC theoretically offers much potential. However, in the year so far, it slipped about 0.4% below parity, which isn’t particularly exciting.
Nevertheless, Exelon may be one of the top utility stocks with renewable energy potential for the long haul. According to its website, Exelon commits itself to sustainability throughout its operations. Technically, as power demand increases, the enterprise should benefit from grid stability, expanding its spectrum from its core operations to innovative green energy solutions. Financially, the company could use some shoring up of its overall profile. That said, investors will appreciate its consistent profitability, particularly its solid net margin of 11.37%.
Lastly, analysts peg EXC as a consensus moderate buy. Their average price target lands at $46.29, implying nearly 8% upside potential.
On the date of publication, Josh Enomoto did not have (either 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.