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3 Low-Beta Utility Stocks to Buy Amid Ongoing Market Volatility
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The Wall Street rally that started in 2023 halted over the past few weeks despite inflation showing signs of declining, which has raised hopes surrounding rate cuts. On Aug 2, all three major indexes fell sharply following the release of fresh economic data that ignited fears of the economy slipping into a recession.
The Dow Jones Industrial Average tumbled 1,5% or 610.71 points to end at 39,737.26, while the S&P 500 fell 1.8% or 100.12 points to close at 5,346.56.
The Nasdaq slid 2.4% to finish at 16,776.16. The tech-heavy index has now declined more than 10% from its recent all-time high and entered correction territory.
Friday’s selloff came as the Labor Department reported that jobs growth in July slowed more than expected to just 114,000, sharply lower than the 179,000 seen in June. Also, the unemployment rate rose to 4.3% in July which was above the consensus estimate of a rise of 4.1% and the highest level since October 2021.
Wall Street was so far interpreting bad news as good news, but the sharp jump in the unemployment rate and a rapidly cooling jobs market has compelled it to accept bad news.
Rising fears that the economy might slip into a recession have ignited fears among investors as market participants believe that the Federal Reserve may have held higher interest rates for too long.
The U.S. economy has shown solid resilience amid the Federal Reserve's efforts to curb high inflation, which saw it increasing its benchmark policy rate 11 times between 2022 and 2023, taking it to a 23-year-high in the range of 5.25-5.5%.
However, the impact of these higher borrowing costs has started to show. Although the Federal Reserve has hinted at starting its easing cycle, with the first rate cut likely in September, followed by two more later this year, investors’ sentiment is has dampened, making markets volatile.
Our Choices
Given this situation, it would be wise to invest in defensive stocks. We have chosen three utility stocks with a low beta (beta greater than 0 but less than 1), a high dividend yield and a favorable Zacks Rank. These are American Electric Power Company, Inc. (AEP - Free Report) , FirstEnergy Corp. (FE - Free Report) and Ameren Corporation (AEE - Free Report) .
American Electric Power Company, Inc. is a public utility holding company, which, through directly and indirectly owned subsidiaries, generates, transmits and distributes electricity, natural gas and other commodities. AEP is one of the largest integrated utilities in the United States, serving nearly 5.6 million customers in 11 states.
American Electric Power Company’s expected earnings growth rate for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the past 60 days. AEP currently carries a Zacks Rank #2. American Electric Power Company has a beta of 0.53 and a current dividend yield of 3.46%.
FirstEnergy Corp.is a diversified energy company. Through its subsidiaries and affiliates, FE engages in the transmission, distribution and generation of electricity.
FirstEnergy Corp’s expected earnings growth rate for the current year is 5.5%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 60 days. FE currently carries a Zacks Rank #2. FirstEnergy Corp has a beta of 0.49 and a current dividend yield of 3.98%.
Ameren Corporation is a utility company, which generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. AEE serves nearly 2.4 million electric and more than 900,000 natural gas customers.
Ameren Corporation’s expected earnings growth rate for the current year is 5.3%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 30 days. AEE currently carries a Zacks Rank #2. Ameren Corporation has a beta of 0.44 and a current dividend yield of 3.25%.
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3 Low-Beta Utility Stocks to Buy Amid Ongoing Market Volatility
The Wall Street rally that started in 2023 halted over the past few weeks despite inflation showing signs of declining, which has raised hopes surrounding rate cuts. On Aug 2, all three major indexes fell sharply following the release of fresh economic data that ignited fears of the economy slipping into a recession.
The Dow Jones Industrial Average tumbled 1,5% or 610.71 points to end at 39,737.26, while the S&P 500 fell 1.8% or 100.12 points to close at 5,346.56.
The Nasdaq slid 2.4% to finish at 16,776.16. The tech-heavy index has now declined more than 10% from its recent all-time high and entered correction territory.
Friday’s selloff came as the Labor Department reported that jobs growth in July slowed more than expected to just 114,000, sharply lower than the 179,000 seen in June. Also, the unemployment rate rose to 4.3% in July which was above the consensus estimate of a rise of 4.1% and the highest level since October 2021.
Wall Street was so far interpreting bad news as good news, but the sharp jump in the unemployment rate and a rapidly cooling jobs market has compelled it to accept bad news.
Rising fears that the economy might slip into a recession have ignited fears among investors as market participants believe that the Federal Reserve may have held higher interest rates for too long.
The U.S. economy has shown solid resilience amid the Federal Reserve's efforts to curb high inflation, which saw it increasing its benchmark policy rate 11 times between 2022 and 2023, taking it to a 23-year-high in the range of 5.25-5.5%.
However, the impact of these higher borrowing costs has started to show. Although the Federal Reserve has hinted at starting its easing cycle, with the first rate cut likely in September, followed by two more later this year, investors’ sentiment is has dampened, making markets volatile.
Our Choices
Given this situation, it would be wise to invest in defensive stocks. We have chosen three utility stocks with a low beta (beta greater than 0 but less than 1), a high dividend yield and a favorable Zacks Rank. These are American Electric Power Company, Inc. (AEP - Free Report) , FirstEnergy Corp. (FE - Free Report) and Ameren Corporation (AEE - Free Report) .
These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Electric Power Company, Inc. is a public utility holding company, which, through directly and indirectly owned subsidiaries, generates, transmits and distributes electricity, natural gas and other commodities. AEP is one of the largest integrated utilities in the United States, serving nearly 5.6 million customers in 11 states.
American Electric Power Company’s expected earnings growth rate for the current year is 6.5%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the past 60 days. AEP currently carries a Zacks Rank #2. American Electric Power Company has a beta of 0.53 and a current dividend yield of 3.46%.
FirstEnergy Corp.is a diversified energy company. Through its subsidiaries and affiliates, FE engages in the transmission, distribution and generation of electricity.
FirstEnergy Corp’s expected earnings growth rate for the current year is 5.5%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 60 days. FE currently carries a Zacks Rank #2. FirstEnergy Corp has a beta of 0.49 and a current dividend yield of 3.98%.
Ameren Corporation is a utility company, which generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. AEE serves nearly 2.4 million electric and more than 900,000 natural gas customers.
Ameren Corporation’s expected earnings growth rate for the current year is 5.3%. The Zacks Consensus Estimate for current-year earnings improved 0.7% over the past 30 days. AEE currently carries a Zacks Rank #2. Ameren Corporation has a beta of 0.44 and a current dividend yield of 3.25%.