Utilities, a favorite among retirees for their dividends, has emerged as the S&P 500’s best performing sector in 2024, with some of its names among Wall Street’s favorites. The sector, which includes companies like Constellation Energy and NRG Energy, has surged 20% in 2024 as investors chase stocks related to powering the data centers behind artificial intelligence. In fact, data centers could need up to 400 terawatt-hours of electricity by 2030, according to Mizuho Securities. Bank of America sees further tailwinds for utilities, a way for the sector to take advantage of falling interest rates. “Utilities and real estate dividends have become even more attractive,” equity and quantitative strategist Savita Subramanian wrote in a report Monday. She noted that with the firm’s economists expecting the federal funds rate, currently at 5.25% to 5.50%, to fall to 3.25% by 2025, dividend yields on most utilities and real estate investment trusts will become increasingly attractive. To that end, CNBC Pro used data from FactSet to screen the S&P 1500 utilities sector for companies that meet the following criteria: Covered by at least 10 analysts Has a buy rating from at least 55% of Wall Street pros who cover it Has a total return of at least 10% in 2024, which is the stock price plus the value of reinvested dividends CMS Energy made the list. About 56% of analysts who cover the stock rate it a buy or overweight. The stock offers a 3.0% dividend yield and a total return of about 23% in 2024. The Jackson, Michigan-based utility reported second-quarter adjusted earnings of 66 cents per share, beating FactSet analysts’ estimates of 62 cents per share. In a late July earnings call, CEO Garrick Rochow reported “strong interest in both manufacturing and data centers in the state.” He added, “We continue to see strong interest in the state, and we’re seeing growth from hyperscalers and, from a data center perspective, what we call midscalers.” The company is also working on the electrification theme. In July, Consumers Energy, a subsidiary of CMS, announced plans to build 1,500 new fast charging stations for electric vehicles by the end of 2030. NextEra Energy is also on that list, with about 65% of analysts surveyed by FactSet rating the company a “buy” or “overweight.” Year-to-date, the company’s shares have a total return of about 38% and a dividend yield of 2.5%. Morgan Stanley featured the company in a late August report after Juno Beach, Fla.-based NextEra reported better-than-expected second-quarter adjusted earnings. “Management noted that backlog with data center customers currently stands at 4%. [gigawatts] “Company highlights include 860 GW vs. 3 GW in Q1 2024,” the company noted. [megawatts] Fifty percent of the new backlog came from Google to support their data center needs.” Additionally, Morgan Stanley analyst David Arcaro expects the data center deal will boost NextEra’s price and profitability. Other stocks on CNBC Pro’s list include Allentown, Pennsylvania-based PPL, which has 22% total revenue growth in 2024 and a dividend yield of 3.2%, and San Diego’s Sempra, which has a dividend yield of 3% and year-to-date total revenue growth of nearly 14%. —CNBC’s Fred Imbert contributed to the report.
Utilities are is up 20% in 2024. Analysts love these dividend-payers
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