By Ian Salisbury
The stock market is looking increasingly shaky. For investors, that makes utility stocks, with their steady earnings and hefty yields, an attractive bet.
While the S&P 500 rallied over the past two days, it remains more than 5% below its late January high. President Donald Trump's address Wednesday night failed to quell investors' fears, sending oil prices higher in response. Combine that with slowing U.S. economic growth, and it's no wonder investors are getting defensive.
Utilities stocks have long been considered a haven. While heat and electricity rates are heavily regulated, Americans pay their power bills in good times and bad.
In the long run higher energy prices could pinch utilities, just like other companies. That's especially true if those prices contribute to inflation -- and by extension higher interest rates. Utilities often take on heavy amounts of debt to build and maintain power grids.
Given the current political climate, however, higher gas prices could actually play into utilities' hands, according to a note Wednesday by Citi Research. That's because sticker shock at the pump could draw away some consumer ire over rising energy costs tied to trends like data center construction.
"We estimate last month's gasoline increase could shift 6--7% of the average household's 2026 combined energy bill from electricity to gasoline in most states, easing political pressure on utility bills ahead of the midterm elections," wrote City analysts Ryan Levine and Xinru Yin. "This shift should be most pronounced in select New England and Mid-Atlantic states, Florida, and Texas, where utility bills represent a larger share of total energy costs."
One convenient way to bet on utilities is the State Street Utilities Select Sector SPDR ETF, which boasts a yield of 2.6% and a portfolio that trades at 19 times 2026 earnings. However, to come up with a list of individual names we screened in FactSet for utilities with above average yields and below average forward P/Es. To avoid yield traps we also looked for names whose quarterly dividend payments ate up no more than 75% of their earnings.
The list includes eight names: Edison International, AES, Eversource Energy, Exelon, DTE Energy, Consolidated Edison, Public Service Enterprise Group, and Xcel.
Not all of these are based in the areas where Citigroup sees value, but a number fit that bill too. Consider New York's Consolidated Edison. It boasts a 3.1% dividend yield. While analysts expect earnings growth of 6% to 7% over the next two years, it trades at just 18 times forward earnings, according to FactSet.
Exelon, which is based in Chicago but serves parts of New Jersey, Pennsylvania, and other Mid-Atlantic states, is another option. The stock yields 3.4% and trades at 17 times forward earnings. Analysts forecast earnings growth of just 3% in 2026, but that should accelerate to 7% next year.
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
April 02, 2026 14:34 ET (18:34 GMT)
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