The utilities sector is made up of companies that provide electricity, natural gas, water, sewage, and other services to homes and businesses. Many of these companies are heavily regulated. They include major utilities companies such as Dominion Energy Inc. (D), Duke Energy Corp. (DUK), and Xcel Energy Inc. (XEL).

Utilities stocks, as represented by the Utilities Select Sector SPDR ETF (XLU), an exchange-traded fund, have underperformed the broader market over the past year. XLU has provided a total return of 15.0% over the past 12 months, compared with the Russell 1000 Index’s total return of 23.6%. These market performance numbers and all statistics in the tables below are as of Dec. 17, 2021.

Here are the top three utilities stocks with the best value, fastest growth, and most momentum.

Best Value Utilities Stocks

These are the utilities stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.

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• NRG Energy Inc.: NRG Energy owns and operates power-generating facilities, primarily in the United States. The company provides energy production, cogeneration facilities, thermal energy production, and resource recovery facilities and services. On Dec. 6, the company announced that it had closed the sale of approximately 4,850 MWs of fossil generating assets to Generation Bridge, an affiliate of ArcLight Capital Partners. NRG received $620 million in net proceeds for the sale. About $500 million of the net proceeds is being allocated to deleveraging. Upon completion of the sale, the board of directors has approved a $1 billion stock buyback plan, which will begin “immediately” and will run through 2022.
• UGI Corp.: UGI is a domestic and international distributor of energy products and services. It offers propane, natural gas, and electricity.
• Pinnacle West Capital Corp.: Pinnacle West Capital is a utility holding company. It offers retail and wholesale electric services throughout the state of Arizona, and is also involved in real estate development. For Q3 2021 ended Sept. 30, the company posted a 2.0% year-over-year (YOY) decline in net income even as operating revenues rose 4.3%. The company said that milder weather compared to the same quarter a year ago hurt its results.

These are the top utilities stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

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• NRG Energy Inc.: See company description above.
• CenterPoint Energy Inc.: CenterPoint Energy is a public utility holding company. Through subsidiaries, CenterPoint provides electricity transmission and distribution, interstate pipeline operations, natural gas distribution, and power generation, and other services. On Dec. 2, CenterPoint took a major step in its plan to eliminate its business exposure to the midstream energy market by the end of 2022, following the completion of the merger between Enable Midstream Partners LP, in which CenterPoint owned a nearly 54% stake, and Energy Transfer LP (ET). CenterPoint received roughly 201 million shares of Energy Transfer LP and $5 million in cash in exchange for its Enable Midstream stake.
• Exelon Corp.: Exelon is a utility services holding company. It distributes electricity to customers in Illinois and Pennsylvania through subsidiaries, distributes gas in the Philadelphia area, and operates nuclear power plants in several states. On Dec. 16, the New York State Public Service Commission approved a “unanimous settlement agreement” involving local, state and federal authorities allowing Exelon to split into two companies in Q1 2022. After the split, one company will focus the transmission and distribution, and the second one will focus on retail energy and generation.

These are the utilities stocks that had the highest total return over the last 12 months.

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• FirstEnergy Corp.: FirstEnergy is a public utility holding company that, through subsidiaries, generates, transmits, and distributes electricity. The company also provides natural gas, energy management, and related services.
• Exelon Corp.: See company description above.
• UGI Corp.: See company description above.

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