The utility sector oftentimes serves as a hedge against inflation, which is evident by its performance in 2022. If the odds of a “soft landing” go out the window and the Federal Reserve (Fed) becomes overly aggressive and causes a prolonged recession, the defensive nature of utility stocks could continue to outperform.
Utilities are a requirement, just as food and water are. Exorbitant price spikes will drive customers to reduce their spending; nevertheless, heating their houses will still be a necessity, just like sitting in a well-lit room; as a result, utilities should be spared from these prospective cutbacks.
Accordingly, Finbold has identified two utility stocks that could help you pay your bills while potentially defending your portfolio from inflation.
Vistra Corporation (NYSE: VST)
Vistra serves its customers by offering retail electricity and natural gas, wholesale energy purchases, sales, and commodity risk management. In its latest earnings call, the company posted a slight loss. Revenues were $3.12 billion, a year-on-year (YoY) reduction by -2.8%, and an earnings miss of $240 million.
Similarly, the guidance given for the rest of the year remained in line with previous expectations of $2.67 billion to $3.27 billion. Currently, the company’s forward dividend yield stands at 2.70%, which means that investors will get $0.177 for each share they own per quarter.
Meanwhile, shares of the company are up 15.22% year-to-date (YTD) and have been on an upward momentum since October of 2021. Recent trading sessions have seen volume increases, and the shares are trading above all daily Simple Moving Averages (SMA).
Similarly, on Wall Street, analysts rate the shares a strong buy, seeing the average next 12 months price of the shares at $31.20, which is 19.08% higher than the current trading price of $26.20.
National Fuel Gas Company (NYSE: NFG)
NFG represents a diversified natural gas utility company owning the entire process from exploration and production to distribution. The company beat earnings expectations by $49.44 million to have a total revenue of $701.72 million. Similarly, it also beat earnings per share (EPS) by $0.06 to have a total EPS of $1.68.
Meanwhile, on the growth side, the company has seen strong growth in the post-pandemic years, especially when the war in Ukraine began when energy prices started to rise. With the rise of prices also came uncertain demand, which is why NFG had a YoY 27.33% increase in revenue as end-users want to ensure the energy delivery.
In short, the company’s shares have seen momentum upwards since October 2021, rising over 14% just in 2022. There was a slight dip in share prices in May; however, the stock has seemingly created a new support line around the $66 level. Right now, shares are trading above all daily SMAs.
Moreover, analysts rate the stock a moderate buy, predicting that in the next 12 months, the shares could reach the price of $74.50, which is 1.79% higher than the current trading price of $73.19.
Despite the utility sector not being deemed as ‘exciting’ investments, they certainly have their use and future potential. It’s possible that the utilities industry will continue to expand as renewables continue to rise, thus futureproofing these companies’ operations.
On the whole, the above two companies have shown growth, demand, and the ability to thrive in difficult situations. Investors looking for low volatility, income-producing defensive stocks should have the above two on their watchlists.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.