![Utilities up 20% by 2024. Analysts love this dividend payer](https://news7g.com/wp-content/uploads/2024/09/108011340-1721848888270-gettyimages-1232537919-PGONCHAR_W0978-780x470.jpeg)
Utilities, a sector favored by retirees for its dividends, have emerged as the top-performing sector in the S&P 500 through 2024 — and some of the names are among those favored by Wall Street. The sector, which includes companies like Constellation Energy and NRG Energy, is up 20% through 2024 as investors snap up names tied to powering the data centers behind artificial intelligence. In fact, data centers could require as much as 400 terawatt hours of electricity by 2030, according to Mizuho Securities. Bank of America sees another driver for utilities: The sector is a way to take advantage of falling interest rates. “Dividends in utilities and real estate have just become much more attractive,” equity and quantitative strategist Savita Subramanian wrote in a report Monday. She noted that the dividend yields of most utilities and real estate investment trusts will only get more attractive as the firm’s economists now predict interest rates will fall to 3.25% by 2025 from the current federal funds rate of 5.25% to 5.50%. To that end, CNBC Pro used FactSet data to screen the S&P 1500 utilities sector, looking for companies that meet the following criteria: Covered by at least 10 analysts. A buy rating from at least 55% of Wall Street professionals covering them. A total return — the stock’s price plus the value of reinvested dividends — of at least 10% by 2024. CMS Energy made the list. About 56% of analysts covering the stock rate it a buy or outperform. The stock offers a dividend yield of 3.0% and has a 2024 total yield of nearly 23%. The Jackson, Michigan-based utility posted adjusted earnings of 66 cents per share in the second quarter, beating analysts’ estimates of 62 cents per share, according to FactSet. CEO Garrick Rochow reported “a lot of interest in the state both in manufacturing and data centers,” on an earnings call in late July. He added that “the state continues to have strong interest, both in the hyperscalers and we’re also seeing some growth in what I would call mid-scalers from a data center perspective.” The company is also playing on the theme of electrification. In July, Consumers Energy, a subsidiary of CMS, announced plans to power 1,500 new fast-charging locations for electric vehicles by the end of 2030. NextEra Energy also made the list, with about 65% of analysts polled by FactSet rating it a buy or hold. The stock has returned nearly 38% year-to-date and offers a dividend yield of 2.5%. Morgan Stanley highlighted Juno Beach, Florida-based NextEra in a note in late August after the utility reported second-quarter adjusted earnings that beat expectations. “Management noted that data center customer backlog now stands at 4 [gigawatts] compared to 3 GW in Q1 2024,” the company noted. “The company’s highlight is 860 [megawatts] Among the new backlog added is from Google to support its data center needs.” Additionally, Morgan Stanley analyst David Arcaro expects the data center deals to yield higher prices and returns for NextEra. Other names that made CNBC Pro’s list include Allentown, Penn.-based PPL, which has a 2024 total return of 22% and a dividend yield of 3.2%, and San Diego-based Sempra, which has a dividend yield of 3% and a total return of nearly 14% year-to-date. —CNBC’s Fred Imbert contributed reporting.