Top 5 Utility Stocks by Market Cap

Utility investing is often closely linked to commodities. For the most part, utility firms depend on commodities like natural gas and coal to provide electricity to their customers. While they are certainly not a direct play on the commodity world, their close ties make them a unique indirect play. These stocks are often coveted for high dividend yields, providing steady income when rates are frozen at 0.25%. Below, we outline the three biggest utility stocks by market cap to help investors decided if any of them belong in their portfolio [for more utilities news and analysis subscribe to our free newsletter].

Duke Energy (DUK)

Quick Stats as of (9/17/2012)

• Market Cap: $45.2 billion
• EPS: $3.36
• Avg Vol: 4.7 million
• Beta: 0.16

Based in North Carolina, Duke Energy is one of the most well-known names in the investing world. The company operates in the U.S. and Latin America, providing energy for millions of homes each year. The stock has a market cap of approximately $45 billion while paying out a handsome dividend of 4.8%. It should be noted that the high dividend yield is a result of a payout ratio of 89%, a figure that may ward some investors away from DUK. For the most part, the underlying financials of the firm look solid but growth has been a bit slow, coming in at just 2% last quarter (yoy).

National Grid (NGG)

Quick Stats as of (9/17/2012)

• Market Cap: $39.5 billion
• EPS: $4.61
• Avg Vol: 400,000
• Beta: 0.66

This U.K.-based firm provides electricity and gas in Great Britain and northeastern United States. Their above ground electricity lines total to about 4,500 miles, while their natural gas segment provides the commodity to about 10.8 million people. NGG has a current P/E ratio of 12, making it an attractive buy with its healthy EPS of $4.6. Of course, it wouldn’t be a utility stock without a massive dividend yield; investors of this stock are treated to a yield of 7.3% that comes from a payout ratio of 66%, a bit healthier than DUK. Two things to note in their financials: quarterly growth has been relatively weak as of late and they have a massive debt/equity ratio of 264. If you are not to keen on firms financed by a fair amount of debt, NGG probably isn’t for you [see also Commodities to Profit From Schiff’s Currency Crisis].

Southern Company (SO)

Quick Stats as of (9/17/2012)

• Market Cap: $39.3 billion
• EPS: $2.48
• Avg Vol: 4 million
• Beta: 0.13

An electrical utility firm based in Atlanta, this company generates, transmits, and distributes electricity using commodities like coal, natural gas, and hydro power among others. As of the end of the last fiscal year, Southern Company had the capacity to produce 12,222 megawatts. Just barely smaller than NGG, SO is relatively popular among traders, with more than 4 million shares trading hands each day. Its dividend is the smallest on this list, but it is highly unlikely that any investor would complain about the 4.4% payout from this stock. SO is up 6.4% in the trailing 52 weeks, trailing the S&P 500 though this should be no surprise given its extremely low beta.

TransCanada (TRP)

Quick Stats as of (9/17/2012)

• Market Cap: $32.7 billion
• EPS: $2.03
• Avg Vol: 350,000
• Beta: 0.68

TransCanada is probably best-known for the Keystone Pipeline project that has caused quite a controversy among politicians all over the US and Canada. The firm is an energy infrastructure company and is currently one of the biggest names in oil sands. The firm currently pays out a nice dividend yield of 3.9% with a payout ratio of 80%. Currently, quarterly growth is lagging, but keep a close eye on this stock as any news concerning a green light of the Keystone XL project will be big news for this security [see also How to Profit From a Keystone XL Pipeline Approval].

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Disclosure: No positions at time of writing.