Best utility stocks to buy in 2022

Utility stocks represent reliable investments that you can use as a balance to the more risky parts of your portfolio. Here our experts pick out the best utility companies to invest in this year.
Updated: Sep 23, 2022
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A utility stock is usually seen as a long term investment that offers the potential for steady growth. This guide takes you through some of the top options in the industry that can provide that and explains how you can get your hands on them.

What are the top utility stocks to buy?

Our expert picks can be found in the table below. You can click on the links in the table to find the most up to date price information and market analysis, or scroll down to learn more about why each one was chosen.

#Stock symbolCompany nameTrade now
1EIXEdison International
2AWKAmerican Water Works
3SRESempra Energy
4WRTGEssential Utilities
5AEPAmerican Electric Power Company
List selected by our team of analysts, updated September 27 2021

1. Edison International (NYSE: EIX)

Edison International is a holding company whose largest subsidiary, Southern California Edison, provides electricity, gas, and fresh water to a large part of California. It was first established more than a century ago, in 1886.

The Edison stock price has shown the sort of steady growth we look for from a utilities company. Over the last decade it increased by 50%, despite some fairly serious setbacks along the way, most notably the coronavirus pandemic which sent stocks into freefall around the world.

Edison already offers its customers the option to switch to a ‘green rate’, which lets them get their power from renewable sources. Green energy could provide some of the biggest growth opportunities in the future, and another positive for investors is that the company has paid a dividend for a long time – it’s first payout was all the way back in 1910.

2. American Water Works (NYSE: AWK)

American Water Works is a diverse water supply company that provides water to the US and Canada. It was formerly owned by a German holding group but has been a public company in its own right since 2008.

It has performed well for its investors since then. The share price has doubled roughly every five years, with the most recent doubling taking place in less than three. It’s very popular with institutions, which tend to hold a large amount of stock and make the price more stable and resistant to shocks. That was demonstrated by the COVID-19 crash, which affected American Water far less than other companies.

The company has grown through acquisitions in recent years, with a number of purchases adding millions of new customers. It’s making strides to become more efficient, which means it can invest more in infrastructure without putting up prices, and – the best news for investors –  has increased its dividend by more than 10% annually for seven years in a row.

3. Sempra Energy (NYSE: SRE)

Sempra is one of the largest energy companies in North America. Its subsidiaries supply energy to the southern and western United States, as well as parts of Mexico. It was formed through a merger in 1998.

The company is another that has rewarded its customers handsomely with steady growth over the past decade. In recent times Sempra has expanded into Texas and sold off its operations in South America, both of which have received the approval of the investment community.

Those moves also mean that the company has become leaner and more efficient. Alongside its growth in the southern United States, it’s increasing the size of its business in Mexico, which looks to be an area of real potential in the years to come. 

4. Essential Utilities (NYSE: WRTG)

Essential Utilities is an American water, wastewater, and natural gas company First formed in 1886, its entry into the natural gas market is a much more recent manoeuvre, which was only added to the portfolio in 2018. In 2020, it combined the two parts of the business into one, and renamed it Essential Utilities.

The company has steadily grown in value over the long term but the picture has been more mixed in the recent past. It has barely increased its share price over the last couple of years while it has been reorganising the business.

However, the fact it has changed its business to offer a broader service bodes well for the future. It now controls one of the largest underground mains supplies of water and gas in the country, and its recent acquisitions have added almost half a million new potential customers to the mix.

5. American Electric Power Company (NASDAQ: AEP)

American Electric Power is one of the largest electricity supplies in the United States. It owns the biggest transmissions network in the country, from which it supplies power to vast swathes of the US and eastern Canada. It was founded in 1906.

Like every other company on this list, the long term trend has been one of slow, incremental growth. Over the last decade the share price has almost doubled which, as for any utility stock, is exactly the sort of performance that investors like to see.

The size of its infrastructure and a potential customer base in the millions is what makes American Electric a potentially exciting investment. It’s invested heavily in growing capacity to cope with rising demand, and established cleaner sources of energy to adapt to a more climate-conscious world in the future.

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What is a utility stock?

Any company that’s involved in the production or supply of basic utilities, such as electricity, gas, or water. These businesses tend to be established, older companies and many of them own a monopoly or near-monopoly over the customers in a particular region. That gives them reliable revenue streams that they often use to pay out dividends to shareholders.

Are utility shares a good investment?

Utilities are a good way to reduce the overall risk of your portfolio. This type of company provides necessary services, so their income stream stands up even during times of economic uncertainty. They are also a good source of dividends and it’s much less likely (although not impossibly) for a large utility supplier to run into financial difficulties.

It’s generally best to stick to the largest utility companies as these offer the most stability. You shouldn’t expect to see lots of speedy growth from these investments, so you don’t want to pour all of your money into utilities as it can put a cap on your potential to grow wealth.

However, as a general rule these companies are safe and reliable investments. Along with blue-chip companies, they should provide the cornerstone to any successful portfolio. Sign up to a broker to get started on your utilities journey right away.

Latest utility news

Sempra Energy (NYSE: SRE) has recovered roughly 20% since mid-June but famed inventor Jim Cramer is convinced the stock is not out of room to run just yet. Cramer’s bull case for Sempra Energy stock Cramer expects the energy infrastructure company to benefit as the United…
U.S. equities might be out of the bear market but another correction in the autumn remains on the cards, according to David Bianco – the Chief Investment Officer of DWS Americas. Bianco is all for utilities stocks though Interestingly, though, he still recommends “utilities” – a…
General Motors Company (NYSE: GM) has partnered with Pacific Gas and Electric Co (NYSE: PCG) on a pilot programme aimed at developing electric vehicles with a unique ability to power a house in case of grid failure, confirmed a press release on Tuesday. Another benefit of owning…
The benchmark S&P 500 index is down another 2.0% on Tuesday as investors continue to pull out of the equity market on fears of quantitative tightening, but Grace Capital’s CIO says the following two stocks, while “boring”, will likely outperform this year. Cheniere Energy Inc (NYSEAMERICAN: LNG) Her…
On Thursday, Lam Research Corp (NASDAQ:LRCX) shares declined by 2.32% after announcing its most recent quarterly results. The company reported its FQ1 earnings Wednesday after markets closed, beating the average for analyst estimates. However, Lam’s revenue for the quarter fell short of expectations despite posting solid…
With US utilities bouncing back to recover from last month’s losses, we sifted through some of the top-rated picks to identify three strong candidates to consider buying in October 2021.  All these stocks trade at incredible valuation multiples and seem to have bottomed, triggering a rebound. UGI Corp UGI Corp…

Sources & references
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James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.