4 Utility Stocks to Buy as Consumer Confidence Continues to Shrink

Americans aren’t confident about the economy’s health and its future as several factors continue to raise fears in their minds. A shrinking jobs market and the impact of tariffs continue to raise concern despite the Federal Reserve cutting interest rates last month and hinting at more rate cuts this year.

Given the uncertainty, it would be wise to invest in safe-haven defensive stocks from the utility sector. These include Atmos Energy Corporation ATO, Consolidated Water Co. Ltd. CWCO, NorthWestern Energy Group, Inc. NWE and Northwest Natural Holding Company NWN. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

These stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank.

Consumer Confidence Plummets

Consumer confidence fell to 94.2 in September, declining 3.6 points month over month and missing the consensus estimate of a reading of 96, the Conference Board said on Tuesday. The Present Situation Index, a gauge of the consumers' assessment of current business and labor market conditions, dropped 7 points to 125.4.

The short-term expectations for income, business conditions and employment also declined 1.3 points in September to 74.8. Any reading below the threshold of 80 indicates a higher risk of the economy slipping into a recession.

Growing concerns over a shrinking labor market have primarily been denting consumers’ confidence. Consumers’ assessment of current job availability has now declined for the ninth consecutive month.

Also, high prices of goods continue to build pressure on consumer spending. President Donald Trump’s tariffs have already pushed up the prices of goods, with high inflation still remaining a concern.

The Federal Reserve cut interest rates by 25 basis points last month to boost the economy after the jobs report painted a grim picture of the economy. The central bank also hinted at two more rate cuts of quarter basis points each this year. However, the worries have turned markets volatile once again.

4 Utility Stocks With Upside

Atmos Energy Corporation

Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.3 million customers in more than 1,400 communities across eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 73,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.

Atmos Energy has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. ATO has a beta of 0.75 and a current dividend yield of 2.05%.

Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.

Consolidated Water Co. has an expected earnings growth rate of 0.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 24.4% over the last 60 days. CWCO presently has a Zacks Rank #2. Consolidated Water has a beta of 0.58 and a current dividend yield of 1.60%.

NorthWestern Energy Group

NorthWestern Energy Group, Inc. is a growing, financially sound, investor-owned energy company. It has provided reliable and affordable energy to customers in Montana, South Dakota and Nebraska. NWE got its start in small communities, providing essential service that allowed them to grow and prosper.

NorthWestern has an expected earnings growth rate of 5.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. NWE presently has a Zacks Rank #2. NorthWestern has a beta of 0.40 and a current dividend yield of 4.54%.

Northwest Natural Holding Company

Northwest Natural Holding Company builds and maintains natural gas distribution systems, as well as invests in natural gas pipeline projects through its subsidiaries. NWN serves residential, commercial and industrial customers primarily in the United States, Canada and Service Territory.

Northwest Natural Holding Company has an expected earnings growth rate of 25.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last 60 days. Northwest Natural Holding Company has a beta of 0.59 and a current dividend yield of 4.37%.

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This article originally published on Zacks Investment Research (zacks.com).

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