Three High-Return Utilities Stocks Worth Investing $500 Immediately
In the ever-evolving world of energy, the utility sector stands out as a long-term investment opportunity, given its slow and deliberate pace. This is due to the sector's critical role in powering modern life (1).
For dividend-focused investors, the utility sector presents multi-decade growth opportunities that align with rising electricity demand and clean energy transitions. Here are three strategic investment options to consider:
- NextEra Energy (NYSE: NEE): A leading renewable energy and regulated utility company, NextEra Energy offers an attractive dividend yield over 3%. The company benefits from the surge in renewable capacity needs and growing electrification trends like AI data centers and manufacturing onshoring (2)(3).
NextEra Energy has seen significant growth due to its operations in the clean energy sector and the in-migration to Florida, one of the largest electric utilities in the country (1). The company projects 6% to 8% increases in adjusted earnings per share through at least 2027 and a 10% dividend growth through at least 2026 (1). A $500 investment in NextEra Energy will net you about six shares (1).
- Brookfield Renewable: A globally diversified renewable operator, Brookfield Renewable boasts exposure to hydropower, wind, solar, and storage. Positioned to benefit from renewable electricity growth nearly doubling by 2050 according to projections, this company is an attractive choice for those seeking long-term growth (2).
- Vanguard Utilities ETF (VPU): A diversified utility sector ETF, Vanguard Utilities offers broad exposure to the U.S. utility market. It provides stable dividend income and participation in the sector’s growth driven by increasing electricity demand, without the need to pick individual stocks (3)(4). With an attractive 2.7% yield, more than twice the yield of the S&P 500 index, Vanguard Utilities is an appealing choice for investors (4).
The expected growth in U.S. electricity demand from 2020 to 2050 is substantial, with projections indicating a roughly 55% increase between 2020 and 2040. This growth is driven heavily by electric vehicles (expected to grow 9,000% by 2050) and data centers (projected to increase electricity use by 300% over the next decade or so) (4)(3).
For those who prefer a simpler investment approach, the Vanguard Utilities ETF is a good choice. A $500 investment in Black Hills Corporation, which operates regulated natural gas and electric utilities across several states and serves approximately 1.35 million customers, will allow you to buy around eight shares (1).
In summary, U.S. electricity demand is expected to grow significantly by mid-century, and dividend investors may consider NextEra Energy, Brookfield Renewable, or the Vanguard Utilities ETF as strategic ways to capitalize on this long-term trend.
