Including utility stocks in your portfolio can enhance diversification and offer protection during tough times. Additionally, these stocks often pay steadily increasing dividends, providing a reliable income stream for investors.
Against this backdrop, investors could consider quality utility stocks Enel SpA (ENLAY), Brookfield Infrastructure Corporation (BIPC), and UGI Corporation (UGI) for stable income and growth.
The utilities market is expected to grow to $8.83 trillion in 2028 at a CAGR of 6.4%. The anticipated growth during the forecast period can be attributed to the increase in the global population, accelerated economic growth, increased investments in renewable energy, and a rise in global utility mergers and acquisitions.
The American Clean Power Association (ACP)'s new Clean Power quarterly market report for the first quarter of 2024 reveals that the industry hit major milestones in the first quarter: utility-scale solar exceeded 100 gigawatts (GW) of installed capacity, and the first offshore wind project in federal waters started delivering 132 MW of clean, reliable power to the grid.
Considering these factors, let’s examine the fundamentals of the utility sector stock picks.
Enel SpA (ENLAY)
Headquartered in Rome, Italy, ENLAY is an integrated operator in the electricity and gas industries worldwide. It generates, distributes, transmits, and sells electricity; transports and markets natural gas; and constructs and operates generation plants and distribution grids.
ENLAY’s annual dividend is $0.45, which translates to a yield of 6.31% at the current share price. Its four-year average dividend yield is 6.06%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.9% over the past three years.
ENLAY’s EBITDA grew at a CAGR of 8% over the past three years. Also, its revenue grew at a CAGR of 12% during the same period.
ETN’s trailing-12-month ROCE of 13.6% is 50.5% higher than the industry average of 9.04%. Its trailing-12-month ROTC of 6.76% is 68.8% higher than the industry average of 4%.
During the first quarter that ended March 31, 2024, ENLAY’s total revenues were reported at €19.43 billion ($21.16 billion), and its operating profit increased 35.6% year-over-year to €4 billion ($4.36 billion). Its profit for the period grew 54.5% year-over-year to €2.24 billion ($2.24 billion), and its earnings per share rose 90% year-over-year to €0.19.
Street expects ENLAY’s revenue for the quarter ended June 2024 to increase 22.5% year-over-year to $27.79 billion. The company’s EPS for the year ending December 2024 is expected to grow 12.1% year-over-year to $0.74.
The stock has gained 24.1% over the past nine months to close its last trading session at $7.37.
ENLAY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade in Growth, Value, and Sentiment. It is ranked #2 out of 54 stocks in the Utilities - Foreign industry.
Beyond what is stated above, we’ve also rated ENLAY for Stability, Momentum, and Quality. Get all ENLAY ratings here.
Brookfield Infrastructure Corporation (BIPC)
BIPC and its subsidiaries own and operate regulated natural gas transmission systems in Brazil. The company also engages in regulated gas and electricity distribution operations in the United Kingdom and electricity transmission and distribution and gas distribution in Australia.
BIPC pays an annual dividend of $1.62, which translates to a yield of 4.35% at the current share price. Its four-year average dividend yield is 3.42%. BIPC has paid dividends for the past three years.
BIPC’s EBITDA grew at a CAGR of 27.1% over the past three years. Also, its revenue grew at a CAGR of 26.3% during the same period.
In terms of the trailing-12-month Return on Total Capital, BIPC’s 11.21% is 179.9% higher than the 4% industry average. Likewise, its 15.13% trailing-12-month net income margin is 20.8% higher than the 12.52% industry average. Furthermore, the stock’s 81.64% trailing-12-month EBITDA margin is 122.4% higher than the 36.72% industry average.
For the fiscal first quarter ended March 31, 2023, BIPC’s total revenues rose 23% year-over-year to $5.19 billion. The company’s net income attributable to the partnership came in at $170 million, up 639.1% from the year-ago value. Its consolidated funds from operations rose 29.3% year-over-year to $1.47 billion. In addition, its FFO per unit came in at $0.78, representing an increase of 8.3% year-over-year.
For the quarter ended June 30, 2024, BIPC’s FFO is expected to increase 8.3% year-over-year to $0.78. Its revenue for fiscal 2024 is expected to increase 7.7% year-over-year to $19.30 billion.
Shares of BIPC have gained 30.6% over the past three months to close the last trading session at $38.35.
BIPC has an overall rating of C, equating to Neutral in our proprietary rating system.
BIPC has a B grade for Growth and Quality. It is ranked #3 out of 60 stocks in the Utilities - Domestic industry.
In addition to the POWR Ratings highlighted above, one can access BIPC’s ratings for Value, Momentum, Sentiment, and Stability here.
UGI Corporation (UGI)
UGI distributes, stores, transports, and markets energy products and related services in the United States and internationally. The company operates through four segments: AmeriGas Propane, UGI International, Midstream & Marketing, and UGI Utilities.
UGI has been paying dividends to its shareholders for the past 36 years. Its annualized dividend of $1.50 per share translates to a dividend yield of 6.40% on the current share price. Its four-year average yield is 4.27%. Over the past three and five years, UGI’s dividend payments have grown at CAGRs of 4% and 6.8%, respectively.
UGI’s total assets grew at a CAGR of 1.5% over the past three years. Also, its revenue grew at a CAGR of 3.8% during the same period.
UGI’s trailing-12-month asset turnover ratio of 0.48x is 120.4% higher than the industry average of 0.22x. Its trailing-12-month gross profit margin of 48.83% is 10.1% higher than the industry average of 44.35%. Similarly, its trailing-12-month Return on Total Capital of 5.65% is 41.1% higher than the industry average of 4%.
UGI’s total revenues for the fiscal second quarter that ended March 31, 2024, stood at $2.47 billion. In addition, its adjusted net income attributable to UGI rose 16.5% from the year-ago quarter to $423 million. Also, its adjusted earnings per share grew 17.3% year-over-year to $1.97. As of March 31, 2024, its total current liabilities amounted to $1.82 billion, compared to $2.27 billion as of March 31, 2023.
Analysts expect UGI’s revenue for the quarter ended June 30, 2024, to increase 4.3% year-over-year to $1.73 billion. Its EPS for the quarter ending December 31, 2024, is expected to rise 5% year-over-year to $1.26. The company surpassed Street EPS estimates in three of the trailing four quarters.
UGI’s shares have gained 12.6% over the past nine months and to close the last trading session at $24.08.
UGI has an overall C rating, equating to Neutral in our proprietary rating system.
It has a B grade for Momentum, Growth, and Quality. Within the Utilities - Domestic industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have UGI’s ratings for Stability, Sentiment, and Value. Get all UGI ratings here.
What To Do Next?
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ENLAY shares were trading at $7.36 per share on Wednesday afternoon, down $0.01 (-0.18%). Year-to-date, ENLAY has gained 1.29%, versus a 17.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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