Top Three Divide-Yielding Utility Shares Worth Investing in November
If you're into the monotonous charm of dividend stocks, utilities are a great place to dip your toes. However, not all utilities share the same appeal, which is why you might want to give a closer look at Black Hills (BKH -3.88%), NextEra Energy (NEE -2.42%), and Eversource Energy (ES -2.83%) as November begins. The main focus here is that each of these utility companies has its own unique charm.
1. Black Hills: The dependable underdog
If you haven't come across Black Hills before, don't fret. With a market cap of approximately $4.1 billion, it's a small player in the utility sector. It caters to around 1.3 million electric and natural gas consumers across parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Despite the mundane nature of its business, it gains from the fact that its customer base is growing almost three times faster than the overall US population growth rate.
The real allure lies in Black Hills' steady and gradual increase in dividends. Over the past decade, it's managed approximately a 5% annualized dividend growth rate, which isn't too shabby. But what sets it apart is its unblemished dividend growth record for 54 consecutive years, making it one of the few 'Dividend Kings' in the utility sector. Add to that the stock's 4.4% dividend yield, which surpasses the 2.7% average utility dividend yield, and you'll see why good things sometimes come in small packages.
2. NextEra Energy's dividend growth spree
If Black Hills is the slow and steady tortoise, NextEra Energy is the speedy hare. This is most evident in its 11% annualized dividend growth rate over the past decade. That's a significant figure for a utility, where growth of 2-4% is considered noteworthy. To sweeten the deal, NextEra has raised its dividend every year for three decades. While this isn't as impressive as Black Hills, but when you factor in the dividend growth, it's easy to see why investors are drawn to NextEra's stock.
The growth is driven by two primary businesses. First, NextEra has a solid foundation in the regulated utility domain with Florida Power & Light. It's benefited from the influx of people to the Sunshine State for years. On top of this robust base, NextEra has built one of the largest solar and wind energy companies globally. With clean energy still having a massive growth potential, there's little reason to believe that NextEra Energy's dividend growth story will hit a dead end soon.
The only drawback is that the stock tends to trade at a premium price due to the popularity of its story. As of now, the dividend yield is 2.6%, which is a bit lower than the industry average. But if you're a dividend growth investor, you're likely to overlook this.
3. Eversource Energy: A potential value grab
Eversource Energy has the least enticing story among the trio in many ways. With a market cap of $23 billion, it's a sizable utility, but not a titan in the industry. Its business is spread across a mix of utility business, including regulated electric utilities, water utilities, natural gas utilities, and transmission assets, but it doesn't lead the pack in any of them. While it operates in the Northeast, which is an important sector of the U.S., the region isn't as alluring as the Sunbelt in terms of population growth.
What makes Eversource intriguing is its 4.3% dividend yield. That happens to be close to its highest levels in recent history, suggesting that the stock is currently undervalued. To be fair, the company has faced some challenges with investments in offshore wind farms, which have resulted in substantial one-time charges. Consequently, investors have had reason to feel pessimistic about the stock. However, considering that the dividend has been consistently increasing for more than two decades, it's possible that the market is being overly critical.
In fact, management forecasts 5-7% earnings growth for the foreseeable future, which should trigger a similar rate of dividend growth. If you have a value-focused approach, Eversource could be an attractive pick in November.
- Diversifying your portfolio with Black Hills and finance: Given the dependable nature of Black Hills as a utility company, with steady dividend growth and a 54-year unblemished record, investing in Black Hills could provide a solid addition to a diversified portfolio.
- Investing in NextEra Energy's dividend growth story: NextEra Energy's impressive 11% annualized dividend growth rate over the past decade and 3-decade track record of raising dividends make it an attractive investment option for those interested in maximizing their returns through dividend investing.
