The utilities sector’s growth prospects appear appealing with the growing and evolving consumer demand, strong economic developments, and technological advancements.

Given the industry’s resilient outlook, it could be wise to invest in fundamentally sound utility stocks Duke Energy Corporation (DUK), Consolidated Edison, Inc. (ED), and American Electric Power Company, Inc. (AEP) for potential gains.

Driven by worldwide population growth, urbanization, and the adoption of efficient technologies like EVs, Artificial Intelligence (AI), and data centers, the global electricity demand is on a rapid surge. Further, the global push towards decarbonization and green revolution significantly contributes to the market dynamics.

The residential sector is leading the highest consumption of electricity in the United States. Power demand in the US is expected to hit record highs in the forthcoming period. U.S. Energy Information Administration (EIA) projects power demand to surge to 4,165 billion kWh in 2025, which was around 4,086 billion kWh in 2024.

With such a rapid increase in electricity demand, the utilities market is poised to expand exponentially going forward. The global utilities market is expected to reach around $9.21 trillion by 2029, exhibiting growth at a CAGR of 6%. The market growth over the coming years is attributable to faster economic growth, changing trends toward renewable energy, and increasing population.

Thus, investors could lean towards sound utility stocks offering consistent dividend payouts to benefit from the blossoming utility industry. Investors will have the advantage of regular income along with a high potential for capital appreciation over the years.

Given the promising prospects of the Utilities – Domestic industry, let’s look at the fundamentals, starting with the third stock.

Stock #3: Duke Energy Corporation (DUK)

DUK, together with its subsidiaries, operates as an energy company. It operates in the Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I) segments. The company generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest.

DUK’s annual dividend payout of $4.18 translates to a yield of 3.86% at the current share price. Its four-year average dividend yield is 3.99%. Moreover, the company’s dividends have increased at a CAGR of 2% over the past three years. DUK has raised its dividends for 13 consecutive years.

On November 21, DUK launched the Duke Energy + Electrada Fleet Mobility Microgrid in Mount Holly, a first-of-its-kind electrification center for commercial and public electric fleet vehicles. This first-of-its-kind project in the U.S. aims to offer a zero-emission, carbon-free microgrid option for fleet charging.

During the third quarter that ended September 30, 2024, DUK reported total operating revenues of $8.15 billion, representing growth of 2% year-over-year. Its operating income grew 1.6% year-over-year to $2.14 billion. Also, net income available to DUK common shareholders stood at $1.23 billion and $1.60 per share, up 1.1% and 0.6% year-over-year, respectively.

For the fourth quarter (ended December 2024), analysts expect DUK’s revenue to grow 1.3% year-over-year to $7.30 billion. For the same quarter, the company’s EPS is expected to increase 9.9% year-over-year to $1.66. Furthermore, DUK has surpassed the consensus revenue estimate in each of the trailing four quarters.

DUK’s stock has gained 7.5% over the past six months and 8.9% over the past year to close the last trading session at $108.23.

DUK’s robust outlook is reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Stability. Within the Utilities – Domestic industry, DUK is ranked #21 of 58 stocks.

Click here to access additional ratings of DUK for Value, Momentum, Growth, Sentiment, and Quality.

Stock #2: Consolidated Edison, Inc. (ED)

ED engages in the regulated electric, gas, and steam delivery businesses. The company provides electric services to approximately 3.7 million customers in New York City and Westchester County, gas to around 1.1 million customers in Manhattan, the Bronx, parts of Queens, and Westchester County, and steam to approximately 1,530 customers in parts of Manhattan.

On October 17, ED declared a quarterly dividend of $0.83 a share on its common stock. The dividend payment was made on December 16, 2024, to stockholders of record as of November 13, 2024.

The company pays an annual dividend of $3.32, which translates to a yield of 3.73% at the current share price. Its four-year average dividend yield is 3.64%. Moreover, the company’s dividend payouts have increased at a CAGR of 2.3% over the past three years. ED has raised its dividends for 50 consecutive years.

In the third quarter that ended on September 30, 2024, ED’s total operating revenues increased 5.7% year-over-year to $4.09 billion. The company’s operating income grew 19.4% from the year-ago value to $862 million. Its adjusted earnings came in at $583 million or $1.68 per share, indicating increases of 3.9% and 3.7% from the prior year’s quarter, respectively.

Analysts expect ED’s revenue and EPS for the second quarter (ending June 2025) to increase 8.7% and 15.3% year-over-year to $3.50 billion and $0.68, respectively. Also, the company has topped the consensus EPS estimate in all four trailing quarters, which is remarkable.

Shares of ED have surged marginally over the past six months to close the last trading session at $89.01.

ED’s POWR Ratings reflect its sound fundamentals. The stock is ranked #9 out of 58 stocks within the same industry.

Click here to access all the ED ratings.

Stock #1: American Electric Power Company, Inc. (AEP)

AEP is an electric public utility holding company engaged in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers. The company operates in Vertically Integrated Utilities; Transmission and Distribution Utilities; AEP Transmission Holdco; and Generation & Marketing segments.

On December 18, AEP’s subsidiary Southwestern Electric Power Co. announced the ongoing development of several new generation projects. These initiatives are designed to enhance SWEPCO’s diverse energy portfolio by adding natural gas facilities with wind and solar farms, addressing the growing capacity demands of its customers in a cost-effective manner.

On October 22, AEP’s Board of Directors declared a regular quarterly cash dividend of $0.93 per share on its common stock, reflecting an increase of $0.05 per share. The dividend was paid on December 10, 2024, to shareholders of record as of November 8, 2024, and marked AEP’s 458th consecutive quarterly common stock cash dividend.

AEP pays a $3.72 annual dividend yielding 4.03% at the current share price. Its four-year average dividend yield is 3.63%. Its dividends have increased at a 6% CAGR over the past three years and a 5.7% CAGR over the past five years.

During the third quarter that ended September 30, 2024, AEP’s total revenues increased 1.5% year-over-year to $5.42 billion, and its operating income amounted to $1.35 billion for the same quarter. The company’s non-GAAP total operating earnings came in at $985.40 million and $1.85 per share, up 6.7% and 4.5% year-over-year, respectively.

Street expects AEP’s EPS and revenue to grow 2.7% and 4.9% year-over-year to $1.26 and $4.87 billion for the fourth quarter (ended December 2024). Moreover, the company has topped the consensus EPS estimates in three of the trailing four quarters.

Over the past six months, the stock has gained 5.9% and 9.2% over the past year to close the last trading session at $92.26.

AEP’s bright prospects are reflected in its POWR Ratings. AEP has a B grade for Stability and Growth. It is ranked #2 among 58 stocks within the Utilities – Domestic industry.

To see the other ratings of AEP for Value, Quality, Momentum, and Sentiment, click here.

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DUK shares were trading at $108.23 per share on Thursday afternoon, up $1.42 (+1.33%). Year-to-date, DUK has gained 0.45%, versus a 0.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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