Utilities are one of the
few market sectors showing strength these days. Why?
Utilities provide products
that everyone needs regardless of which way the economy is heading,
namely electricity, water and natural gas.
Another advantage of utilities
is that many of them pay high dividends. Thus, even if share prices
drop, you’ll still be collecting substantial income while you wait
for the market to recover.
Screening
for Utilities
With that in mind, I’m going
to describe a strategy for using my favorite stock screener Finviz,
to scan the market for utility stocks worth considering.
Why do I recommend Finviz so
often in these columns? For starters it’s free, more capable, and is
easier to use than other screeners that I’ve tested.
Set Up
Screener
Start by selecting Screener on
the Finviz home page (finviz.com). On Finviz, you use filters to
specify your screening criteria. From the home page, click “All” on
the Filters bar to see the available filters. For each filter that
you want to use, click on the associated dropdown menu to select a
search value.
Define
Candidate Universe
To begin, limit your list to
U.S.-based utilities by using the “Sector” dropdown menu to select
“Utilities” and the “Country” filter to select “USA.”
Specify
Dividend Yield
For stocks, dividend yield
(annual dividend divided by price you pay for stock) is analogous to
the interest rate you receive on a bank account. Specify “Over 2%”
using the Dividend Yield filter to limit your list to utilities
paying significant dividends. Later, you could adjust that number up
if you want to only see higher payers.
Fastest
Growers
Most utilities operate
relatively stable businesses, in terms of earnings per share.
However, I’ve found that generally, stocks with the fastest earnings
growth tend to outperform their category. So, use the “EPS Growth
This Year,” EPS Growth Next Year,” and “EPS Growth Next 5 years”
filters and specify “over 5%” for each to limit your list to the
fastest earnings growers.
Smart
Money
Next, limit your list to
utilities in favor with the smart money by specifying “Over 80%” for
“Institutional Ownership.”
Finally, as you’ve probably
already heard, in the stock market, “the trend is your friend.” So,
use the “Performance” filter to specify “Month Up” to isolate
uptrending utility stocks.
Screen
Results
My screen turned up five
utilities paying 3% plus dividend yields.
-
Evergy
(EVRG): Delivers electricity to 1.6 million customers in Kansas
and Missouri. Dividend yield is 3.2%.
-
First Energy (FE):
Serves six million electricity customers in Ohio, Pennsylvania,
West Virginia, Maryland, New Jersey and New York, 3.3% dividend
yield.
-
NRG Energy (NRG):
Serves six million electricity customers in Texas, 3.3% dividend
yield.
-
UGI
Corporation (UGI): Delivers propane, liquefied petroleum
gases, natural gas and renewable energy products to customers in
numerous states and in 17 European countries, 3.8% dividend
yield.
As always, consider these utilities to be research
candidates, not a buy list. The more you know about your stocks, the
better your results.
published
4/12/22