NEW YORK (TheStreet) -- With aggregate year-to-date gains of 26.38%, according to Fidelity, the utilities sector -- one of least talked-about sectors in 2014 -- has also been one of the most dominant.
Aside from beating both the Dow Jones Industrial Average (DJI) (up 8.77% year to date) and the S&P 500 (SPY) (up 12.63%), utilities beat every other major sector, including health care (up 23.77%) and technology (up 20.56%), which came in second and third, respectively.
This has been a trend for the trailing twelve months. Utilities are up 27.18%, leading every other group. And considering the 26.34% gain in the Utilities Select Sector SPDR Fund (XLU) , utilities deserve more recognition.
Duke shares have responded to management's strategic plans to grow the company's power-generating assets to create value for shareholders. Looking to grow its earnings in the long term, Duke plans to increase its capital spending in 2015. The company has cited various cost synergies it plans to realize from its merger with Progress Energy, completed in July.
Duke expects its earnings and dividend growth to accelerate from its capital investment plans. Considering the recent acquisition of NCEMPA generating assets, which the company says will be accretive to earning-per-share growth through 2018, Duke is one of the best utilities to buy not just for 2015, but for the next four to five years.
For similar reasons, PPL is a stock to keep an eye on in 2015. The company serves markets in the U.K. and the U.S., providing the sort of diverse geographical operation conservative investors appreciate. PPL is also one of the top revenue producers (growing 43.36%) and a strong dividend payer, yielding 4.2% -- almost twice the average of dividend payers in the S&P 500.
Dividends are just of the benefits. Utilities offer many more advantages, too.
Utility stocks rank as some of the top choices for investors looking to preserve their wealth. They're great defensive plays.
Utilities -- partly based on their unique business models -- enjoy special monopoly privileges from regional and municipal governments. That helps companies like Southern (SO) , Xcel Energy (XEL) (up 29.67% year to date) and PG&E (PCG) (up 35.20%) reward their shareholders.
And these gains are likely to continue well into 2015.
Part of the reason for the gains above is that, unlike other industries that are prone to market and economic volatility, utilities remain relatively immune to economic conditions. In other words, consumers will always need their heat, water, and electricity -- regardless of what pressures their household budgets may face.
For this reason, San Francisco-baed PG&E, one of the largest combined natural gas and electric utilities in the U.S., surged in 2014, and gained 32.73% in the trailing 12 months, beating both the Dow (up 10.23%) and S&P 500 (13.56%). Revenue jumped 18.2% year over year, beating estimates by $260 million. These shares are likely not done climbing.
PG&E stock is trading at a trailing price-to-earnings ratio of 18, almost two points lower than the average P/E of companies in the S&P 500. And on a forward-looking basis, that P/E drops to 15.78, also two points lower than companies in the S&P 500, according to the Wall Street Journal.
With the stock trading at around $54, investors looking for value and income should consider PG&E, which delivers energy to nearly 16 million people in Northern and Central California. Its fair value should reach $60 to $62 in the next 12 to 18 months, yielding gains of 10% to 14%. And with its dividend yield of 3.34%, it pays to be patient.
They may trail the market in sex appeal and growth, but utility stocks are leaders when it comes to generating income. Their year-to-date returns, which have outperformed the broader market, suggest that smart investors are laughing all the way to the bank. And the safety utilities provide helps these investors sleep well at night.
TheStreet Ratings team rates SOUTHERN CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate SOUTHERN CO (SO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
You can view the full analysis from the report here: SO Ratings Report