Best U.S. Electric Utility Stocks to Win in AI-Driven Surge in Power Demand

Best U.S. Electric Utility Stocks to Win
Published on: Apr 11, 2024

The largest utility companies in the United States predict exponential growth in electricity demand in the coming years, driven by data centers and new technologies such as generative AI. As a result, the peak electricity demand for the next decade has been significantly revised upwards by US utility companies and regulatory agencies. The ultimate artificial intelligence (AI) play is power, and US electric utility stocks are poised to directly benefit from this trend.

Renewable energy giant NextEra Energy, Inc. (NYSE: NEE) stated to investors last month that electricity demand in the United States will experience exponential growth driven by the needs of data centers. However, consulting firm Grid Strategies reported earlier this year that the US grid is not adequately prepared for the substantial increase in load.

In addition to this new growth driver of AI, US utility company stocks are also subject to regulation by government agencies, with demand, revenue, and cash flow all being very stable,  resulting in the stability and security of dividend.

Top US Electric Utility Stocks

  • Duke Energy (NYSE: DUK): A regulated electricity and natural gas utility serving customers in six states.
  • NextEra Energy, Inc. (NYSE: NEE): An energy holding company operating an electric utility in Florida and a leading renewable energy business.
  • Xcel Energy Inc (NYSE: XEL): A regulated electricity and natural gas utility operating in eight Midwestern states.

Duke Energy

Duke Energy is one of the largest electricity companies in the US, operating in electricity utilities and infrastructure, gas utilities and infrastructure, and commercial renewable energy. The company serves 8.2 million retail electricity customers in North Carolina, South Carolina, Florida, Indiana, Ohio, and Kentucky. Duke Energy’s stock currently has an annual dividend of $4.10 per share, a dividend yield of 4.27%, and an investment-grade credit rating. Earnings per share are expected to grow by 5%-7% annually until 2027, with an approximate annual total return of 10%.

NextEra Energy

NextEra Energy is one of the largest utility companies in the US, with three main business platforms: Florida Power & Light (FPL) – the largest power utility company in the US with 5.7 million accounts, Energy Resources focusing on wind, solar, natural gas pipelines, transmission lines, and renewable gas facilities, and NextEra Energy Partners. The stock currently has a dividend yield of 3.21%, with earnings per share expected to grow by 6%-8% annually until 2026, and dividends increasing by 10% annually until at least 2024.

Xcel Energy

Xcel Energy operates four electric and natural gas utility companies, serving 3.8 million electricity customers and 2.1 million natural gas customers, with a dividend yield of 4.09%. The company is actively investing in high-return expansion opportunities, such as replacing coal-fired power plants with wind power. These investments are expected to support annual earnings per share growth of 5%-7%, resulting in a shareholder total annual return of 8%-10% including dividends.

AI Dividend Yielding Stocks Natural Gas Utilities