The prospects of the utility industry appear promising thanks to a growing focus on clean energy solutions, increasing investments, and supportive government initiatives like tax credits. Also, evolving technologies and their rising prevalence paves new opportunities for efficiency and growth.
Given the industry’s rosy outlook, it could be wise to buy high-dividend utilities stocks Centrica plc (CPYYY), Brookfield Infrastructure Corporation (BIPC), and TransAlta Corporation (TAC) for steady income.
With the pouring investments in renewable energy infrastructure, like in solar and wind projects, and growing commitment to clean energy solutions, the utility industry is rapidly transforming and growing. Last year, the share of renewable energy in the US electric power generation increased to over 20%, a significant climb from a few years ago.
The utilities market is expected to grow strongly in the coming years. It is projected to expand to $8.83 trillion by 2028, growing at a CAGR of 6.4%. The market growth can be attributed to factors like the growing global population, rapid economic development, and expanding mergers and acquisitions activities.
Also, Generative AI is significantly contributing to the operations of the utilities sector. The technology enhances aspects like energy generation, distribution, and management. With this, the global generative AI in the utilities market is expected to exhibit growth at a notable CAGR of 34%.
Amid this, utility stocks offering high dividend payouts can be ideal investment choices. Such stocks will provide a regular income stream and prospects of long-term gains through capital appreciation.
Considering the industry’s bright outlook, let’s examine the fundamentals of the utility sector stock picks.
Centrica plc (CPYYY)
Headquartered in Windsor, United Kingdom, CPYYY operates as an integrated energy company in the UK, Ireland, Scandinavia, North America, and internationally. It operates through British Gas Services & Solutions; British Gas Energy; Centrica Business Solutions; Bord Gáis Energy; Centrica Energy; and Upstream segments.
On July 29, CPYYY acquired ENSEK, a leading provider of digital transformation services in the energy sector, and its innovative customer account management platform, Ignition. The acquisition will deliver solid returns and enhance the company’s ability to offer creative solutions to customers with evolving energy systems.
On July 25, CPYYY’s Directors proposed an interim dividend of £0.01 per ordinary share for the six months ended 30 June 2024, indicating an increase from the previous year's dividend. The dividend is payable on Thursday, 14 November 2024, to shareholders of record on Friday, 4 October 2024.
CPYYY pays an annual dividend of $0.20, which translates to a yield of 3.14% at the current share price. Its four-year average dividend yield is 1.03%.
For the six months that ended June 30, 2024, CPYYY posted total group revenue of £10.54 billion ($13.80 billion). Its group operating profit was £1.03 billion ($1.35 billion). The company’s profit for the period came in at £1.35 billion ($1.77 billion), and its EPS was 24.6 pence.
Over the past month, CPYYY’s stock has surged 1.5% to close the last trading session at $6.46.
CPYYY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Value. It also has a B grade for Sentiment, Quality, and Momentum. Within the B-rated Utilities - Foreign industry, CPYYY has topped the list of 52 stocks.
Click here to access additional ratings of CPYYY for Growth and Stability.
Brookfield Infrastructure Corporation (BIPC)
BIPC owns and operates regulated natural gas transmission systems in Brazil. It is also engaged in regulated gas and electricity distribution operations in the United Kingdom, electricity transmission and distribution, and gas distribution in Australia.
On August 1, BIPC’s Board of Directors declared a quarterly distribution of $0.41 per unit, payable on September 27, 2024, to unitholders of record as of the close of business on August 30, 2024. The distribution reflects an increase of 6% from the prior year.
BIPC’s annual dividend of $1.62 equates to a yield of 4.09% at the current share price. Its four-year average dividend yield is 3.49%. And the company's dividend payouts have increased at a CAGR of 5.9% over the past three years.
For the second quarter that ended June 30, 2024, BIPC’s revenues increased 20.7% year-over-year to $5.14 billion. Its consolidated funds from operations grew 27.2% from the year-ago value to $1.42 billion. Also, the company’s FFO stood at $608 million and $0.77 per unit, up 10.1% and 6.9% year-over-year, respectively.
Analysts expect BIPC’s FFO for the fiscal year (ending December 2024) to increase 6.8% year-over-year to $3.15. The company’s revenue is expected to grow 6.3% year-over-year to $19.05 billion over the same period.
BIPC’s stock gained 9.8% over the past month and 14.4% over the past six months to close the last trading session at $39.65.
BIPC’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
BIPC has a B grade for Quality, Momentum, and Growth. The stock is ranked first out of 59 stocks within the Utilities - Domestic industry.
In addition to the POWR Ratings we’ve stated above, we also have BIPC ratings for Sentiment, Stability, and Value. Get all BIPC ratings here.
TransAlta Corporation (TAC)
Based in Calgary, Canada, TAC is engaged in the development, production, and sale of electric energy. The company operates in five segments, Hydro; Wind and Solar; Gas; Energy Transition; and Energy Marketing segments. The company holds interest in approximately 922 megawatts of owned hydroelectric generating capacity located in Alberta, British Columbia, and Ontario.
On July 29, TAC’s Board of Directors declared a quarterly dividend of C$0.06 ($0.04) per common share payable on October 1, 2024, to shareholders of record at the close of business on September 1, 2024.
The Board also declared the following quarterly dividend on its Cumulative Redeemable Rate Reset First Preferred Shares: Series A - C$0.18 ($0.13), Series B - C$0.43 ($0.32), Series C - C$0.37 ($0.27), Series D - C$0.50 ($0.37), Series E - C$0.43 ($0.32), and Series G - C$0.31 ($0.23). The dividend will be paid on September 30, 2024, to shareholders of record on September 1, 2024.
TAC pays an annual dividend of $0.18, which translates to a yield of 1.96% at the current share price. Its four-year average dividend yield is 1.73%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.7% over the past five years. TAC has raised its dividends for four consecutive years.
In the second quarter that ended on June 30, 2024, TAC reported revenues of C$582 million ($429.13 million), and its adjusted EBITDA was C$312 million ($230.05 million) for the same period. Net earnings attributable to common shareholders came in at C$56 million ($41.29 million) or C$0.18 per share for the quarter, respectively.
Furthermore, the company’s cash flow from operating activities increased 881.8% from the prior year’s quarter to C$108 million ($79.63 million).
The company reaffirmed its 2024 financial guidance. TAC’s adjusted EBITDA target is between C$1.15 billion ($847.95 million) - C$1.30 billion ($958.55 million). Its FCF is expected to be C$450 million ($331.81 million) - $600 million ($442.41 million) and $1.47 - $1.96 per share.
Shares of TAC have surged 11.9% over the past month and 31.7% over the past six months to close the last trading session at $9.05.
TAC’s bright prospects are reflected in its POWR Ratings. The stock has an overall grade of A, which equates to a Strong Buy in our proprietary rating system.
TAC has a B grade for Quality, Momentum, and Value. It is ranked #4 among 52 stocks within the B-rated Utilities - Foreign industry.
Other ratings for TAC of Growth, Sentiment, and Stability are also provided, click here to check.
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CPYYY shares were trading at $6.33 per share on Tuesday afternoon, down $0.13 (-2.01%). Year-to-date, CPYYY has declined -11.37%, versus a 16.19% 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.
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