Utilities’ Profit Outlook

The case for utilities starts with the industry’s profit outlook, which is the most favorable in decades due to the continuing buildout of wind and solar power and the upgrade of transmission networks. That could translate into annual earnings growth averaging 6% to 7% for the rest of the decade. Combine that with dividend yields averaging nearly 4% and annual total returns could be about 10% without any revaluation in the stocks. Utilities are also trading at an average of about 16 times projected 2024 earnings following 2023’s decline, against 20 for the S&P 500.