4 Low-Beta Utility Stocks to Bank on as Consumer Sentiment Sinks

U.S. consumer sentiment was little changed in October compared to last month’s reading, as consumers braced for some positive developments and tried to see past the ongoing government shutdown. However, concerns about the labor market and high inflation continued.

Although the sentiment was slightly better than expected, it remains low as consumers are still uncertain about the economy’s future. Also, markets have been volatile this month due to these uncertainties.

Given this situation, it would be ideal to take refuge in low-beta, defensive stocks, such as those from the utilities sector, to navigate this volatility. These include Atmos Energy Corporation ATO, CenterPoint Energy, Inc. CNP, Consolidated Water Co. Ltd.  CWCO 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 Sentiment Still Low

The University of Michigan’s Surveys of Consumers preliminary reading showed that consumer sentiment came in at 55, dropping just 0.1 point from September’s reading of 55.1, and was higher than the consensus estimate of 54.1.

The survey’s near-unchanged reading came as consumers’ one-year expectations of inflation fell in October. The index for consumers’ expectations of inflation over the next 12 months dropped to 4.6% in October, from 4.7% in the prior months. The expectations for long-term inflation, or over the next five years, remained unchanged at 3.7%.

However, the expectation for near-term inflation remains high, with the present inflation also quite elevated. The Federal Reserve cut interest rates by 25 basis points in September and has hinted at two more quarter-basis-point rate cuts this year. However, higher inflation and a shrinking labor market have been lingering concerns.

Also, federal funding has come to an abrupt halt this month due to the ongoing government shutdown, which is about to enter its third week. Although investors have tried to overlook the shutdown, markets have turned volatile over the past week, with all three major indexes ending in negative territory for the week.

4 Low-Beta 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 Energy operates 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 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO has a beta of 0.74 and a current dividend yield of 1.97%.

CenterPoint Energy, Inc.

CenterPoint Energy, Inc. is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. CNP maintains the wires, poles and electric infrastructure serving more than 2.5 million metered customers in the greater Houston area and southwestern Indiana.

CenterPoint Energy has an expected earnings growth rate of 8.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. CNP currently has a Zacks Rank #2. CenterPoint Energy has a beta of 0.57 and a current dividend yield of 2.24%.

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 25.6% over the last 60 days. CWCO presently has a Zacks Rank #2. Consolidated Water has a beta of 0.53 and a current dividend yield of 1.67%.

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. NWN has a beta of 0.57 and a current dividend yield of 4.39%.

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

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