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3 Utility Stocks to Buy on Imminent September Rate Cut
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The utilities sector is known to offer investors a steady source of income in the form of dividends. This makes the sector a fallback option for investors during recessions and economic downturns. Alternatively, utility stocks usually fall out of favor during times of economic growth, with growth stocks driving the markets.
These are defensive stocks that are not affected or very slightly affected by market volatility. Demand for these stocks is not impacted much when markets are volatile because of the very nature of the stocks. Even during the 2008 financial crisis, they had held the fort. Utility stocks are examples of such defensive instruments that protect investments when the goings are not good. Whatever the state of the economy, a household or a business needs its electricity, water, or gas supplies.
Currently, the market expects interest rate cuts in September to mark the first loosening of grip on monetary policy since tightening started in early 2022. The central bank wants to analyze further economic data on jobs, inflation and various sectors before embarking on rate cuts. However, after a recent spate of data from the labor market warning of an economic slowdown, expectations are that there would be at least two rate cuts announced this year.
Inflation has cooled down significantly in recent months. The jobs market has slowed down as well, albeit remaining robust and resilient. It looks very likely that once the Fed takes the plunge, rates will come down fast. After the 2008 sub-prime crisis, the Fed cut interest rates to stimulate the economy. On cue, investors flocked to utilities, which are viable defensive choices during macroeconomic downturns. There is no reason why history will not repeat itself. The sector has done very well this year already, with the S&P 500 Select Sector SPDR (XLU) advancing 16.7% year to date as of Jul 31, 2024.
In addition, utilities are usually considered long-term buy-and-hold options as they regularly declare dividends, and dividend yields on utility stocks are generally higher than those paid by other equities. In this environment, utility stocks provide much-required stability and growth potential. Hence, astute investors should consider such stocks at present.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
UGI Corporation (UGI - Free Report) is an integrated gas distributor and markets energy products and related services. UGI’s expected earnings growth rate for the current year is 2.8%. The Zacks Consensus Estimate for its current-year earnings has remained unchanged over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Northwest Natural Holding Company (NWN - Free Report) is a natural gas distribution, pipeline and storage company. NWN’s expected earnings growth rate for the next year is 2.5%. The Zacks Consensus Estimate for its next-year earnings has improved 26.3% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Veolia Environnement SA (VEOEY - Free Report) provides water, waste and energy management solutions globally. VEOEY’s expected earnings growth rate for the current year is 207%. The Zacks Consensus Estimate for its current-year earnings has improved 0.5% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.
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3 Utility Stocks to Buy on Imminent September Rate Cut
The utilities sector is known to offer investors a steady source of income in the form of dividends. This makes the sector a fallback option for investors during recessions and economic downturns. Alternatively, utility stocks usually fall out of favor during times of economic growth, with growth stocks driving the markets.
These are defensive stocks that are not affected or very slightly affected by market volatility. Demand for these stocks is not impacted much when markets are volatile because of the very nature of the stocks. Even during the 2008 financial crisis, they had held the fort. Utility stocks are examples of such defensive instruments that protect investments when the goings are not good. Whatever the state of the economy, a household or a business needs its electricity, water, or gas supplies.
Currently, the market expects interest rate cuts in September to mark the first loosening of grip on monetary policy since tightening started in early 2022. The central bank wants to analyze further economic data on jobs, inflation and various sectors before embarking on rate cuts. However, after a recent spate of data from the labor market warning of an economic slowdown, expectations are that there would be at least two rate cuts announced this year.
Inflation has cooled down significantly in recent months. The jobs market has slowed down as well, albeit remaining robust and resilient. It looks very likely that once the Fed takes the plunge, rates will come down fast. After the 2008 sub-prime crisis, the Fed cut interest rates to stimulate the economy. On cue, investors flocked to utilities, which are viable defensive choices during macroeconomic downturns. There is no reason why history will not repeat itself. The sector has done very well this year already, with the S&P 500 Select Sector SPDR (XLU) advancing 16.7% year to date as of Jul 31, 2024.
In addition, utilities are usually considered long-term buy-and-hold options as they regularly declare dividends, and dividend yields on utility stocks are generally higher than those paid by other equities. In this environment, utility stocks provide much-required stability and growth potential. Hence, astute investors should consider such stocks at present.
Our Choices
The stocks below flaunt a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here, V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.
UGI Corporation (UGI - Free Report) is an integrated gas distributor and markets energy products and related services. UGI’s expected earnings growth rate for the current year is 2.8%. The Zacks Consensus Estimate for its current-year earnings has remained unchanged over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Northwest Natural Holding Company (NWN - Free Report) is a natural gas distribution, pipeline and storage company. NWN’s expected earnings growth rate for the next year is 2.5%. The Zacks Consensus Estimate for its next-year earnings has improved 26.3% over the past 60 days. This Zacks Rank #2 company has a VGM Score of B.
Veolia Environnement SA (VEOEY - Free Report) provides water, waste and energy management solutions globally. VEOEY’s expected earnings growth rate for the current year is 207%. The Zacks Consensus Estimate for its current-year earnings has improved 0.5% over the past 60 days. This Zacks Rank #1 company has a VGM Score of B.