By Ian Salisbury
With war raging in the Middle East, investors are looking for places to ride out the market's volatility. Utility stocks, like PSEG and FirstEnergy, might offer the right balance of safety and growth.
Utilities, many of which are regulated by state power boards, offer attractive dividend yields, but aren't known for rapid profit growth. So far this year, investors have been able to enjoy something like the best of both worlds.
The State Street Utilities Select Sector SPDR exchanged-traded fund yields 2.5%, about twice the broad market's 1.2% payout. It has also returned 10.2% in 2026 including dividends, better than any other sector fund besides energy. The S&P 500 is down 2.6%, according to Dow Jones Markets Data.
One reason for utilities' success is investors appear to be gravitating toward defensive, hard-asset stocks amid the uncertainty of the war in Iran. But utilities are also benefiting from interest in artificial intelligence -- even as the market grows wary of tech names that have defined the theme over the past several years.
While investors have grown nervous about tech firms' capital expenditures and how AI will play out in the software industry, one thing investors can still largely agree on is that it will drive energy demand.
"Electric demand growth is forecast to expand at 2% to 3% annually, primarily from data centers," wrote Jefferies equity analyst Julien Dumoulin-Smith in a note Friday. Utilities that manage such growth without angering customers by hiking prices are "uniquely positioned to capture this upside."
Jefferies' top picks in the sector include NiSource, Entergy, Xcel Energy, and American Electric Power -- a Barron's stock pick from February .
Still, investors looking for dividend income need to balance growth with a stock's dividend yield. To that end, we used FactSet to screen for utilities with dividend yields of at least 3%, and estimated 2026 earnings growth that is robust enough to deliver investors a total return of 10% or better.
The list included just four names.
Evergy, which serves eastern Kansas and western Missouri, yields 3.4%. Analysts forecast 2026 profit growth of 10.8%, implying a total return of more than 14% for the year, the highest in our screen. The stock has rallied around 24% in the past year but it still trades at just 19 times forward earnings. That is just slightly higher than the utility sector as a whole, which trades at 18 times.
Other names on the list include New Jersey's Public Service Enterprise Group, a.k.a PSEG, which yields 3.2%; Ohio-based FirstEnergy, with a 3.7% yield; and New York's Consolidated Edison, better known as ConEd, which yields 3.1%.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 13, 2026 13:53 ET (17:53 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments