The utility industry is evolving rapidly, driven by clean energy adoption, grid modernization, and digital innovation, amid regulatory and consumer demand for sustainability.

Amid such conducive trends, investors could consider looking into fundamentally sound utility stocks, ONEOK, Inc. (OKE), American Electric Power Company, Inc. (AEP), and UGI Corporation (UGI), with high dividends.

Driven by worldwide population growth, urbanization, and the adoption of efficient technologies, global electricity demand is on a rapid surge. Further, the global push towards decarbonization and green revolution significantly contributes to the market dynamics.

Total revenue in the utilities market is expected to grow at a CAGR of 7.9% by 2029. Moreover, the increasing investment in smart grid infrastructure using cutting-edge technologies and growing digital transformation with the adoption of various digital technologies are expected to provide opportunities for the energy and utilities analytics market.

Additionally, utilities are considered dividend stalwarts with a steady demand due to the nature of the products they offer. Considering these factors, let’s take a look at the fundamentals of the three Utilities – Domestic stocks, beginning with the third one.

Stock #3: ONEOK, Inc. (OKE)

OKE engages in gathering, processing, fractionating, storing, transporting, and marketing natural gas and natural gas liquids (NGL) in the United States. It operates through four segments: Natural Gas Gathering and Processing, Natural Gas Liquids, Natural Gas Pipelines, and Refined Products and Crude. 

OKE’s annual dividend is $3.96, which translates to a yield of 3.63% at the current share price. Its four-year average dividend yield is 5.83%. Moreover, the company’s dividend payouts have increased at a CAGR of 2.3% over the past five years.

In terms of the trailing-12-month EBIT margin, OKE’s 22.89% is 16.6% higher than the 19.63% industry average. Likewise, its 14.05% trailing-12-month net income margin is 22.7% higher than the 11.45% industry average. Furthermore, the stock’s 16.87% trailing-12-month ROCE is 36.8% higher than the 12.33% industry average.

For the third quarter that ended September 30, 2024, OKE reported total revenues of $5.02 billion, up 19.9% year-over-year. Its net income came in at $693 million, or $1.18 per share, up 52.6% and 19.2% year-over-year, respectively. Also, as of September 30, 2024, the company’s total current assets were $2.88 billion, compared to $3.11 billion as of December 31, 2023.

Analysts expect OKE’s revenue for the fourth quarter ended December 2024 to increase 29.4% year-over-year to $6.77 billion. Its EPS is expected to grow 26.7% over-year-year to $1.49.

Shares of OKE have gained 40.3% over the past nine months to close the last trading session at $108.96.

OKE’s POWR Ratings reflect its outlook. OKE has an A grade for Momentum and a B for Growth. It is ranked #16 among 58 stocks in the Utilities – Domestic industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Click here to access the additional OKE ratings (Quality, Stability, Sentiment, and Value).

Stock #2: American Electric Power Company, Inc. (AEP)

AEP is an electric public utility holding company that generates, transmits, and distributes electricity for sale to retail and wholesale customers in the United States. It operates through Vertically Integrated Utilities; Transmission and Distribution Utilities; AEP Transmission Holdco; and Generation & Marketing segments. 

AEP has paid dividends for 15 consecutive years.  Its annual dividend is $3.72, which translates to a yield of 3.83% at the current share price. Its four-year average dividend yield is 3.63%. Moreover, the company’s dividend payouts have increased at a CAGR of 6% over the past three years.

In terms of the trailing-12-month gross profit margin, AEP’s 45.08% is marginally higher than the 44.92% industry average. Its 13.46% trailing-12-month net income margin is 3.9% higher than the 12.96% industry average.

During the third quarter, which ended September 30, 2024, AEP’s revenue increased by 1.9% year-over-year to $5.40 billion. The company’s non-GAAP operating earnings and non-GAAP operating EPS grew 6.7% and 4.5% year-over-year to $985.40 billion and $1.85, respectively.

Street expects AEP’s revenue for the fourth quarter ended December 2024, to increase 5.8% year-over-year to $4.91 billion. Its EPS is expected to grow 12.5% year-over-year to $1.43. The company surpassed consensus EPS estimates in three of the trailing four quarters.

AEP’s stock gained 19.7% over the past nine months to close the last trading session at $97.25.

AEP’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Momentum, Growth, and Stability. AEP is ranked #8 in the same industry.

Beyond what is stated above, we’ve also rated AEP for Sentiment, Value, and Quality. Get all AEP ratings here.

Stock #1: 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 paid dividends for 37 consecutive years.  Its annual dividend is $1.50, which translates to a yield of 4.99% at the current share price. Its four-year average dividend yield is 4.56%. Moreover, the company’s dividend payouts have increased at a CAGR of 3.2% over the past three years.

UGI’s trailing-12-month gross profit margin of 51.05% is 13.8% higher than the 44.85% industry average. Likewise, the stock’s trailing-12-month ROTC of 5.68% is 39.3% higher than the 4.08% industry average.

In the fiscal year that ended September 30, 2024, UGI’s revenues were $7.21 billion. Its operating income was $770 million, compared to a loss of $1.44 billion in the prior year. While its net income attributable to UGI Corporation stood at $269 million, compared to a loss of $1.50 billion in the prior year. Its adjusted diluted EPS came in at $3.06, up 7.7% over the prior year.

Street expects UGI’s revenue for the fiscal year (ending September 30, 2025) to increase 28.4% year-over-year to $ 9.25 billion. Its EPS for the same year is $2.91. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 22.4% over the past six months, closing the last trading session at $30.09.

UGI’s POWR Ratings reflect bright prospects. The stock has a B grade for Quality and Growth. It is ranked #7 in the same industry.

In addition to the POWR Ratings highlighted above, one can access UGI’s ratings for Stability, Momentum, Value, and Sentiment here.

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OKE shares closed at $108.96 on Friday, up $0.30 (+0.28%). Year-to-date, OKE has gained 8.53%, versus a 1.96% 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. More...

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