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The utility sector has long been known for its abundance of high-dividend stocks. Utility stocks widely pay higher dividend yields than the market average, along with steady dividend increases every year.

And, utility stocks are much less volatile than most other sectors. With volatility spiking in the past few weeks, risk-averse investors could consider utility stocks for their above-average yields and steady dividend growth.

NorthWestern Corp. (NWE)

NorthWestern Corp. is a Sioux Falls, South Dakota based electricity and gas utility. It has 1,570 employees, and primarily serves the states of South Dakota and Montana. Wind, solar, and hydroelectric account for approximately 55% of total combined power generation today.

On October 28th, 2024, NorthWestern announced its Q3 2024 earnings. The results were slightly below expectations, although earnings-per-share of $0.65 increased from the $0.49 reported in the same period of last year. Revenues rose 7.5% year-over-year to $345 million. On July 29th, 2024, the company announced the acquisition of the Energy West natural gas utility distribution system, adding 33,000 additional customers in Montana to its broader business.

In light of more favorable recent developments, however, we are forecasting a more upbeat 6.0% intermediate-term earnings growth rate as the company appears to have reached a positive operational inflection point. The company recently completed a heavy investment cycle with its new power facilities. This came unfortunately timed with a surge in interest rates, which increased financing costs.

NorthWestern aims to have its dividend payout ratio be between 60% and 70%. However, it has now moved above this based on the past few years’ earnings. NWE has increased its dividend for 19 consecutive years.

The AES Corporation (AES)

The AES (Applied Energy Services) Corporation was founded in 1981 as an energy consulting company. The corporation now has businesses in 14 countries and a portfolio of approximately 160 generation facilities.

AES produces power through various fuel types, such as gas, renewables, coal, and oil/diesel. The company has more than 36,000 Gross MW in operation. In 2023, AES produced nearly $13 billion in revenues.

AES Corporation reported third quarter results on October 31st, 2024, for the period ending September 30th, 2024. Adjusted EPS rose 18% to $0.71 for Q3 2024. The company constructed and acquired 2.8 GW of renewable energy year-to-date, and is on course to add 3.6 GW of new projects online in 2024. Leadership expects to achieve the high end of its 2024 guidance for adjusted EPS of $1.87 to $1.97 for the full fiscal year.

Additionally, the company reaffirms its expectation it can grow EPS on average 7% to 9% through 2025 from a base year of 2020. It also still expects annual EPS growth of 7% to 9% from 2023 through 2027.

The corporation has grown the dividend ever since it was instated at $0.08 in 2012, for a total of eleven years to date. The dividend has grown 10% per year on average since 2014, and 5% per year on average in the past five years.

Portland General Electric (POR)

Portland General Electric is an electric utility based in Portland, Oregon, providing electricity to more than 930,000 customers in 51 cities. The company owns or contracts more than 3.5 gigawatts of energy generation, between gas, coal, wind & solar, and hydro.

Portland General reported third quarter 2024 results on October 25th, 2024. The company reported net income of $94 million for the quarter, equal to $0.90 per diluted share on a GAAP basis, compared to $0.46 in Q3 2023. Retail energy deliveries rose 0.3% year-to-date compared to the same prior year period, but wholesale energy deliveries soared 45%.

As a result, total energy deliveries rose 11%. Leadership narrowed its 2024 full year guidance for adjusted earnings per share to $3.13 at the midpoint based on a series of assumptions, most notably a 2.5% increase in annual energy deliveries.

POR has increased its dividend for 18 consecutive years. On April 19th, 2024, Portland General Electric announced a 5% increase in the quarterly dividend to $0.50 per share. POR has a safe dividend with a projected 2024 payout ratio of 65%.

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