The U.S. Market is choppy at present, wherein the major indices are in red, with the S&P 500 and NASDAQ losing 13.5% and 4.9%, respectively, in the past 12 months. The market weakness can be attributable to the hawkish moves of the Fed to lower inflation, the strong dollar hurting U.S export volumes and the ongoing Ukraine war affecting commodities.

The basic objective of an investor is to get a positive return on investment despite knowing that investment in stocks is risky. Amid the volatile market, steady income-oriented investors can choose utility stocks. Mature utility stocks have a long history of dividend payments. These are often considered bond substitutes for investment purposes. The domestic-focused, highly regulated Zacks Utility - Electric Power industry has returned 8.8% to investors in the past 12 months.

Despite the gloomy market condition, investors can accumulate stocks like Exelon Corporation (EXC Quick QuoteEXC - Free Report) , DTE Energy (DTE Quick QuoteDTE - Free Report) and OGE Energy (OGE Quick QuoteOGE - Free Report) , which have an impressive dividend history and ensure a stable income for their equity holders.

Utilities for Stable Income

Capital-intensive Utilities are adversely impacted by ongoing rate increases, as their capital servicing costs go up substantially, denting margins and profitability. Despite the rate increases, mature utilities continue with their stable performances, courtesy of steady customer demands, the implementation of new rates approved by regulatory commissions, and gradual hikes in customer volumes driving utility services’ demands.

Utilities continue to expand and strengthen their infrastructure. They are gradually shifting toward clean-energy sources to produce electricity. Several utilities have planned to provide emission-free electricity to their customers. These mature utilities have a long history of dividend payments. Some of them have a dividend yield of more than 60%, while some are reinvesting their profits in infrastructure and paying lesser dividends to shareholders.

A dividend is a reward paid out by the company to its equity holders for the risk undertaken by investing in the stocks of the company. Amid the choppy market conditions, utilities that are distributing regular dividends offer a regular and safe earnings opportunity for investors. Dividend hikes approved by the boards of directors at regular intervals reflect strong performances of the companies and steady streams of earnings to fund the dividend payments.

Way to Pick Dividend Stocks for Your Portfolio

With the help of the Zacks Stock Screener, we have selected three Utility Electric Power stocks with a Zacks Rank #3 (Hold), a dividend yield of more than 2% and five-year historical dividend growth of more than 1.5%. These stocks have a payout ratio of less than 60, reflecting enough room for future dividend increases.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Utility Picks

Exelon: The company pays out a quarterly dividend of 33.75 cents per share ($1.35 annualized), giving it a 3.1% yield at the current stock price. EXC has a payout ratio of 44%, with a five-year dividend growth rate of 2.1%. (Check Exelon’s dividend history here)

Exelon invests substantially in infrastructure projects. It plans to invest $29 billion between 2022 and 2025 in regulated utility operations for grid modernization and increasing the resilience of its infrastructure for customers’ benefit. The systematic investments will support rate base growth of 8.1% in 2021-2025. Exelon aims to increase its dividend per share annually 6-8% through 2025, subject to the approval of its board of directors. EXC’s stable cash flow allows management to continue distributing regular dividends.

DTE Energy: The company pays out a quarterly dividend of 88.5 cents per share ($3.54 annualized), which gives it a 2.6% yield at the current stock price. DTE has a payout ratio of 59%, with a five-year dividend growth rate of 1.7%. (Check DTE Energy’s dividend history here)

DTE Energy follows a disciplined capital spending program to maintain and upgrade the reliability of its electric utility systems. The company plans to invest $18.1 billion between 2022 and 2026 to strengthen its electric and natural gas operations. Courtesy of its steady performance, DTE Energy, subject to the approval of the board of directors, will increase its annual dividend per share by 5-7% through 2026.

OGE Energy: The company pays out a quarterly dividend of 41 cents per share ($1.64 annualized), which gives it a 4% yield at the current stock price. OGE has a payout ratio of 50%, with a five-year dividend growth rate of 5.9%. (Check OGE Energy’s dividend history here)

OGE Energy is pursuing an aggressive investment strategy to upgrade its infrastructure and provide seamless services to its customers. The company plans to spend $4.75 billion between 2022 and 2026, implying an improvement of 14.7% from the prior five-year capital expenditure plan. Strong financial performance will also enable OGE Energy to continue to grow its dividend in the next five years.