Investing in Electric Utility Stocks

Electric utility stocks are publicly traded companies regulated by government agencies. They make money by providing reliable energy to customers. Here's a closer look at how to invest in the electric utility industry.

Best electric utility stocks

The best electric utility stocks to buy now

Several publicly traded companies operate electric utilities, giving investors lots of options in this sector. Five that stand out as being among the best in the electric utility sector are:

Here's a look at what makes this group stand out as solid electric utility stock investments.

Company details

1. Duke Energy

Duke Energy is one of the largest power companies in the country. It operates two business segments:

• Electric utilities and infrastructure: Operates regulated utilities that serve 8.2 million retail electric customers in North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky
• Gas utilities and infrastructure: Distributes natural gas to 1.6 million customers across North Carolina, South Carolina, Tennessee, Ohio, and Kentucky

Duke Energy's utility portfolio generates steady revenue regulated by government agencies that set its rates. That provides it with stable cash flow to pay dividends (it offered a more than 3.5% dividend yield in late 2025) and expand its utility businesses.

A couple of factors help Duke Energy surpass many electricity stocks. It complements its steady revenue-generating energy businesses with a strong financial profile (including an investment-grade credit rating). It also has a conservative dividend payout ratio, giving it the flexibility to invest in cleaner energy.

Duke Energy is investing a staggering $87 billion in capital products to enhance its operations and reduce its carbon footprint through 2029. Its investments should grow its earnings per share at a 5% to 7% annual rate through 2029, a healthy rate for a large utility.

This should give the company plenty of power to grow its dividend. These drivers should help it supply investors with an attractive total return of around 10% annually.

2. NextEra Energy

NextEra Energy is one of the largest electric utilities in the country. It has three business platforms:

• Florida Power & Light (FPL): FPL is the country's largest electric utility, with 5.8 million accounts.
• Energy Resources: NextEra's energy resources segment is a leader in producing wind and solar energy. It also operates natural gas pipelines, electricity transmission lines, and renewable natural gas facilities.
• XPLR Infrastructure (NYSE:XIFR): NextEra Energy owns a significant interest in XPLR Infrastructure. The partnership owns and operates renewable energy-generating facilities and natural gas pipelines.

NextEra Energy's business segments generate stable cash flow from regulated rate structures and long-term contracts, helping to support a dividend that yielded more than 3% in late 2025.

The company has all the qualities an investor would want in an electric utility. It routinely has one of the highest credit ratings among large, rate-regulated electric utilities. It also typically has a lower-than-average dividend payout ratio, giving NextEra the financial flexibility to invest in cleaner energy while building more renewable power projects.

NextEra's current slate of investments (an industry-leading $120 billion by 2027) should expand its earnings by 6% to 8% annually through 2027 and power dividend growth of 10% per year through at least 2026. That's above-average growth for the sector.

It could help NextEra generate industry-leading total stock returns. Those features position NextEra Energy to continue generating market-beating total returns.

3. Xcel Energy

Xcel Energy operates four electric and natural gas utilities across eight states in the Central United States. Its utilities serve 3.9 million electric customers and 2.2 million natural gas customers. The energy businesses generate predictable rate-regulated revenue, giving Xcel Energy the power to support an attractive dividend that yielded more than 3% in late 2025.

Xcel Energy's excellent qualities include an investment-grade balance sheet and a conservative long-term dividend payout ratio target of 50% to 60%. Its strong financial profile gives it the flexibility to invest in high-return expansion opportunities, such as replacing coal-fired power plants with wind power.

The company believes its investments can transform it into a cleaner electric utility. They also should help to increase its earnings per share by 6% to 8% annually, giving it the power to increase its dividend by 4% to 6% per year. That combination of income and growth could give Xcel Energy the power to produce attractive total shareholder returns of about 9% to 11% per year.

4. Dominion Energy

Dominion Energy provides regulated electricity service to 3.6 million customers in Virginia, North Carolina, and South Carolina. The company also provides natural gas to 500,000 customers in South Carolina.

The utility expects to invest over $50 billion through 2029 to support growing power demand in its service areas. Data centers are a major factor driving power demand, especially in Virginia.

It's investing in a variety of projects, including building a massive offshore wind farm in Virginia that should be operational in 2026. These investments should grow the company's earnings per share at a 5% to 7% annual rate.

Dominion's growing earnings should make its high-yielding dividend (a more than 4.5% yield in late 2025) more sustainable. The company plans to maintain its current dividend rate during its heavy investment phase and start increasing the payment once its payout ratio reaches a more conservative level.

5. Consolidated Edison

Consolidated Edison delivers electricity, gas, and steam to customers in the New York City area. The company has three business segments:

• Consolidated Edison Company of New York: This regulated utility delivered electricity to 3.7 million customers and natural gas to 1.1 million. It also delivered steam to 1,500 customers via the largest steam system in the country.
• Orange and Rockland Utilities: This utility delivered electricity to 300,000 customers and gas to more than 100,000 customers.
• Consolidated Edison Transmission: This business segment invests in electricity transmission projects.

Consolidated Edison's utility operations generate very stable cash flow to support its dividend (3.5% yield in late 2025). The company has increased its dividend for 51 straight years, the longest streak of any utility in the S&P 500. It qualified Consolidated Edison for the elite group of Dividend Kings, companies with 50 or more years of annual dividend increases.

The utility is in an excellent position to continue increasing its dividend. Consolidated plans to invest $38 billion into capital projects through 2029. These investments should support steady earnings and dividend growth in the coming years.

Finding the best

How to find the best electric utility stocks

It's important to know how to analyze electric utility businesses. That will allow you to find companies with the potential to generate attractive total returns. Three main factors have contributed to strong performance in the sector over the years:

1. Financial strength

Having a strong financial profile is vital for an electric utility. It needs to fund the maintenance and expansion of its infrastructure while also paying an attractive dividend to its shareholders.

One of the key ways to gauge the financial strength of a utility is to see whether it has an investment-grade credit rating on its bonds. That's similar to a high credit score, suggesting the borrower is at low risk of defaulting on its debts. An investment-grade rating means a company can borrow money at lower interest rates and better terms.

2. A conservative dividend payout ratio

Utilities pay out a significant percentage of their earnings to investors via their dividends (usually around 65%). However, because financial strength is so important, investors should focus on electric utilities with lower-than-average dividend payout ratios. The lower ratios allow companies to retain more cash to finance growth, which enhances their financial strength.

3. Consistent earnings growth

The best utilities can steadily increase their earnings per share by investing in initiatives that earn high returns on investment. For example, utilities can improve their profitability by retiring aging and expensive coal-fired power-generation plants and replacing them with cheaper, cleaner ones powered by natural gas or renewables.

Likewise, they can increase their earnings by taking advantage of tax credits and other incentives to build out renewable energy projects. Investors seeking electric utility stocks to buy should look for these three characteristics.

These strengths should provide a company with the financial flexibility to steadily expand its earnings and its dividend. Those factors help power an attractive total stock return to shareholders -- the combination of a stock's dividend yield and its stock price appreciation.

Why they're good investments

Why are electric company stocks good investments?

Electric utility companies have several features that make them attractive investments, including:

• Predictable revenue: It costs lots of money to build and maintain electricity-generating plants and electrical distribution systems, so governments give electric utilities a monopoly to operate in a specific region. Government entities then regulate these companies by approving the rates and fees they can charge customers for providing electricity. As a result, electric utilities generate predictable revenue -- a desirable feature for those seeking lower-risk investments.
• Steady growth: Electricity demand tends to be stable and rises steadily. Catalysts such as economic growth, increased digitalization, and the growing adoption of electric vehicles should power steady growth in demand in the coming decades. That should enable electric utilities to continue investing capital to expand their operations, supporting steady earnings growth.
• Attractive dividends: Electric utility stocks also typically pay investors a dividend, which is a cash payment of a portion of the company's profit. Utilities generally offer an above-average dividend yield -- the ratio of a company's annual dividend to its stock price -- because they choose to pay out a larger share of their profit instead of retaining it to expand their operations. The sector's higher dividend yields make these stocks attractive income investments for retirees.

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How to invest

How to invest in electric utility stocks

It's easy to add an electric utility to your portfolio. Here's a step-by-step guide on how to invest in electric utility stocks:

1. Open your brokerage app: Log in to your brokerage account where you handle your investments.
2. Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
4. Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
5. Submit your order: Confirm the details and submit your buy order.
6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.