Investors hope 2024 will treat the utility sector better than 2023 did, so it is a good idea to look at the best high-yield dividend utilities stocks. By now, it’s no secret that utility stocks made up the worst-performing sector in 2023. That which goes down tends to swing back up regarding overall Market investment. Thus, investors continue to look to the utility sector as full of rebound potential in 2024.
These stocks are doubly interesting for the fact that their dividend yields are particularly high at the moment. Falling prices lead to increasing dividend yields, all other things remaining constant. The companies highlighted below all provide dividends yielding 4% or more, except the last firm mentioned.
Best High-Yield Dividend Stocks: Black Hills Corp. (BKH)
Black Hills Corp. (NYSE:BKH) is a relatively unknown utility firm that arguably doesn’t get the coverage it deserves. While many readers may not have heard of Black Hills, it remains one of the higher yield firms on this list, with a dividend paying 4.64% at the moment.
The firm provides natural gas and electricity throughout the Great Plains states. Black Hills serves Iowa, Colorado, South Dakota, Wyoming, Kansas, Montana, and Nebraska.
From a fundamental perspective, there’s an easy narrative to construct for buying BKH stock. While revenues dipped by 8% during the most recent period, the company could easily beat earnings guidance at the consensus level. The company’s EPS was 24% higher than the previous year. That makes the 8% dip in top-line revenues relatively trivial. Furthermore, the company has increased its dividend for 52 consecutive years. The overall narrative around the company is one of stability and high, predictable income for investors.
Duke Energy (DUK)
Duke Energy (NYSE:DUK) Is a much better-known utility stock than Black Hills. Both firms include dividends yielding more than 4%, with Duke Energy’s dividend paying 4.23%.
Duke Energy will continue to pop up on similar lists featuring utility stocks over the coming weeks. It is one of the best-known names in the sector and represents a well-known firm employing over 28,000 workers.
To my previous point, my colleague Muslim Farooque recently wrote about Duke Energy as a top utility pick for 2024. He won’t be the only financial journalist to highlight the company. The reason to believe that is straightforward: Duke Energy is growing on a top-line basis and has improved by more than 7% overall.
Farooque also makes an interesting point: the Carolinas region, where the firm is based, is growing rapidly. Younger people are relocating to areas known for their relatively cheap cost of living. In turn, that will increase demand for the company’s utilities, potentially raising prices.
Entergy (ETR)
Entergy (NYSE:ETR) is based in New Orleans and generates and distributes electricity and natural gas. Some quick arithmetic around its share price and Target price suggests that there are substantial returns to be had by investing in the firm.
Shares currently trade for a bit over $102. However, their consensus target price is approaching $109. When you factor in the $1.13 dividend, paid quarterly, its returns are expected to exceed 10.5% in the next 12 months.
From a fundamental perspective, Entergy continues to do it well and improve. Company-wide earnings increased by $372 million through the year’s first three quarters. Those earnings, of course, allow the company to continue to pay strong dividends. Those dividends currently yield more than 4.4%. That makes Entergy a strong consideration for investors seeking a reliable source of income. It’s fair to argue that now is a strong entry point because analysts expect prices to rise higher over the next year. In the meantime, investors can take advantage of the income opportunity.
Dominion Energy (D)
Dominion Energy (NYSE:D) will get a lot of coverage when it comes to discussions around utility stocks in 2024. The company is one of the better-known utilities firms, so it benefits from wide coverage. Further, Dominion Energy is one of the highest-yield dividend stocks in the sector. Currently, its dividend yields 5.66%. However, D shares are predicted to trade in a relatively tight range, meaning its price appreciation potential is lower than that of some other firms on this list.
In any case, Dominion Energy is a strong consideration for a near guarantee of 6% returns from dividends alone.
My colleague Omor Ibne Ehsan recently highlighted Dominion Energy as a stock that he believes is dirt cheap at the moment. He doesn’t believe that it will stay there. Instead, he believes it is primed to take off. As he notes, natural gas prices appear to be bottoming out, which positions the company for immediate top-line growth as winter temperatures set in.
While it’s true that Dominion Energy’s leverage ratios aren’t great, a shift is underfoot. Rates are expected to fall, making that debt less of an issue as 2024 goes on and the Fed cuts interest rates.
American Electric Power (AEP)
American Electric Power (NASDAQ:AEP) is a pure-play electric utility firm based in Ohio. The stock includes a dividend-yielding approximately 4.4% at the moment. That relatively high yield will continue to make the company attractive for the same reasons investors choose the utility firms overall: Stability and income.
From a fundamental perspective, it’s also important to note that American Electric Power is headed in the right direction. The company had struggled both on the top line and bottom line of late. However, The third quarter represented something of a turnaround for the firm. While top-line results remain muted and revenues decreased slightly, the company found a way to improve earnings dramatically. As a result, EPS increased by 50 cents, or $1.83, in Q3.
The dividend yielding 4.4% and strong target prices suggest that current investors are positioned to reap strong rewards moving forward.
WEC Energy Group (WEC)
WEC Energy Group (NYSE:WEC) Is another multi-utility that engages in much of the same business that many other firms on this list do: electricity and natural gas distribution. The company primarily serves the states of Illinois and Wisconsin. WEC Energy Group distributes electricity and natural gas throughout Wisconsin and in the state of Illinois.
The stock will be particularly interesting and attractive to Dividend investors for a few reasons. One, it currently yields more than 4%, which is relatively high in the world of utility firms. Number two, the company unveiled a plan at the end of December to increase its dividend by 7% in the first quarter of 2024. All stockholders of record on February 14th will be entitled to that increased dividend.
It should be noted that it’s also clear the company is attempting to entice investment as top and bottom-line results continue to suffer slightly. The company is in distress, but it last reduced its dividends in 2004. While there’s clearly more risk here relative to other utility firms, there’s also strong potential for excellent income opportunities as the company incentivizes investment and searches for footing.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) Provides the lowest yield dividend on this list, at 3.05%. However, what the company lacks in pure income potential, it makes up for in growth potential.
Utilities firms don’t have much growth potential in general. Instead, their strength lies in their quasi-monopoly status and the stability that it provides. The truth is that in order for a utility firm to grow, there needs to be an influx of population in their geographic area. That isn’t a normal occurrence for the most part; thus, utility firms tend to be quite stable and grow slowly.
That’s where NextEra Energy is fundamentally different. It is part of a utility company because it owns Florida Power & Light. But the company is also part of a green energy firm and owns NextEra Energy Resources, the world’s largest wind and solar company. The green energy company provides it with growth that is otherwise difficult to capture for utility firms. So consider NextEra Energy for its 3% dividend, but remember that it also has strong growth potential otherwise.
On the date of publication, Alex Sirois 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.
