Over the past few months, threats of higher tariffs, sticky inflation, and elevated interest rates weighed down many macro-sensitive sectors. Those headwinds also drove many investors toward more conservative energy and utility stocks.
That flight to safety happened because most companies won't shut off those essential services just to save a few dollars. That's why those stocks should generate stable and predictable returns even as macroeconomic headwinds rattle the broader markets.
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Three of those stocks are Energy Transfer (ET +1.16%), Xylem (XYL 0.12%), and Waste Management (WM +0.36%). If you only have $2,000 in cash available to invest in this wild market, it might be a prudent move to stick with these three boring but safe plays.
1. Energy Transfer
Energy Transfer, which operates more than 125,000 miles of pipeline across 44 U.S. states, is one of the largest midstream companies in America. Its pipelines act as "toll roads" for transporting natural gas, natural gas liquids (NGLs), crude oil, and other refined products between upstream producers and downstream companies.
NYSE: ET
Key Data Points
Energy Transfer is a master limited partnership (MLP), which pays out most of its earnings per unit (EPU) to its investors as dividends. It currently pays a hefty forward dividend yield of nearly 7%, and it's raised its payout annually for 12 straight years.
From 2014 to 2024, its EPU grew at a compound annual growth rate (CAGR) of 8% as it acquired more of its peers, expanded its pipelines, and benefited from the surging demand for domestic energy. It's faced some pushback from government regulators, Native American tribes, and environmental organizations over the past decade as it built new pipelines. That pressure is waning as the Trump administration prioritizes more investments in the domestic energy market to reduce energy prices. The growing energy needs of the cloud and AI markets should further amplify its near-term growth.
From 2024 to 2027, analysts expect its EPU to grow at a CAGR of 12%. At $19, it still looks like a bargain at 11 times next year's projected EPU -- so it could remain a popular safe haven stock for income-oriented investors in this tumultuous market.
2. Xylem
Xylem is one of the largest water technology providers in the world. The American company's water infrastructure products are used to deliver water, analyze water usage levels, and treat wastewater for a broad range of public utility, industrial, commercial, agricultural, and residential customers in over 150 countries.
NYSE: XYL
Key Data Points
From 2014 to 2024, Xylem's earnings per share (EPS) grew at a CAGR of 7% as the world's demand for clean water steadily increased. The World Economic Forum expects climate change and global population growth to cause the global demand for fresh water to outstrip its available supply by 40% by 2030 -- and that massive gap should generate strong long-term tailwinds for Xylem. From 2024 to 2027, analysts expect Xylem's EPS to increase at a CAGR of 13%.
Xylem's stock still looks reasonably valued at 27 times next year's earnings, and it pays a decent forward yield of 1.4%. It's expected to remain one of the bellwethers of the global water infrastructure market, and it should rally even higher as more investors recognize it as one of the best ways to profit from the growing demand for fresh water.
3. Waste Management
Waste Management, which serves more than 20 million residential, commercial, industrial, and municipal customers, is one of the largest waste disposal and recycling companies in North America. It also converts some of its waste into renewable energy.
NYSE: WM
Key Data Points
From 2014 to 2024, Waste Management's EPS grew at a CAGR of 9%. During that decade, it acquired eight companies, including Advanced Disposal and Stericycle, to expand its reach into adjacent markets. It controls 35% of the waste treatment and disposal services industry, according to IBISWorld, and that scale gives it plenty of pricing power to ride out the cyclical spikes in commodity prices. It's also one of the few companies that can effectively convert landfill gas into renewable natural gas.
From 2024 to 2027, analysts expect its EPS to rise at a CAGR of 12%. Its stock still isn't expensive at 26 times next year's earnings, and it pays a forward yield of 1.5%. It isn't an exciting growth stock, but it's a great way to profit from the world's growing demand for more efficient waste management, recycling, and waste-to-energy conversion services.
