Buy 5 Low-Beta Utility Stocks to Dodge Ongoing Market Volatility

Wall Street’s major indexes have hit multiple all-time closing highs over the past couple of months. However, the journey has been volatile amid a spate of uncertainties that has raised concerns of a slowing economy.

So much so that even the recent tech rally, driven by the artificial intelligence (AI) optimism, has occasionally stalled over the past weeks. Stocks took a hit once again on Thursday, with all three major indexes ending sharply lower after AI stocks pulled back on concerns over their sky-high valuations.

Given this uncertainty, it would be ideal to hold on to or invest in defensive stocks, such as those from the utilities sector. Five such stocks are: Atmos Energy Corporation ATO, American States Water Company AWR, Consolidated Water Co. Ltd. CWCO, Entergy Corporation ETR and Duke Energy Corporation DUK. 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.

Volatility Continues Amid Wall Street Rally

The Dow, the S&P 500 and the Nasdaq have hit multiple all-time closing highs in the past month. However, a spate of factors has kept investors concerned about the nation’s economy and its future. The tech rally has been driving the broader market but has also remained volatile, with stocks occasionally taking a hit.

Tech stocks have been on a roll this year, with several big players announcing massive deals and investments in the AI sphere. The continued optimism has seen investors flock to buy AI stocks. However, the AI trade has often come under pressure on concerns over its sky-high valuations. Thursday’s pullback was a reaction to this that saw the Nasdaq, the Dow and the S&P 500 declining 2%, 0.8% and 1.2%, respectively.

Investors have also been concerned about the economy’s health, with a shrinking labor market raising fears of the nation slipping into a recession. The labor market has been a concern for a while now, with fewer jobs being added to the economy over the past quarter.

Also, layoffs surged in October as companies continued restructuring staffing levels owing to the AI boom. Job cuts in October totaled 153,074, surging 183% sequentially and 175% from year-ago levels, according to a report from outplacement firm Challenger, Gray & Christmas, cited by CNBC.

The ongoing government shutdown has also left investors deprived of fresh economic data, making them unable to get a clearer picture of the nation’s economy. Also, uncertainty over another interest rate cut in December, following hawkish remarks from Federal Reserve Chairman Jerome Powell, has been denting their sentiment.

5 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 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 6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. Atmos Energy has a beta of 0.73 and a current dividend yield of 2.02%.

American States Water Company

American States Water Company, along with its subsidiaries, provides fresh water, wastewater services and electricity to its customers in the United States. AWR principally works through its two major subsidiaries — Golden State Water Company and American States Utility Services.

American States Water Company has an expected earnings growth rate of 4.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 60 days. American States Water Company has a beta of 0.64 and a current dividend yield of 2.72%.

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 1.80% over the last 60 days. Consolidated Water has a beta of 0.51 and a current dividend yield of 1.61%.

Entergy Corporation

Entergy Corporation is primarily engaged in electric power production and retail distribution of power. ETR has 30,000 megawatt (MW) of generating capacity, including more than 8,000 MW of nuclear fuel capacity.

Entergy Corporation has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. Entergy Corporation has a beta of 0.63 and a current dividend yield of 2.49%.

Duke Energy Corporation

Duke Energy Corporation is a diversified energy company with a broad portfolio of domestic and international, natural gas and electric and regulated and unregulated businesses that supply, deliver and process energy in North America and selected international markets. DUK primarily operates through three business segments — Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.

Duke Energy Corporation has an expected earnings growth rate of 7.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. Duke Energy has a beta of 0.45 and a current dividend yield of 3.44%.

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

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