5 Utility Stocks Still Worth Buying In September

The global market is a little choppy at the moment, thanks to a likely hike in interest rates and the uncertainty surrounding the Presidential Election in the U.S., as well as volatile oil prices and sluggish growth in China. Due to these concerns, the World Bank recently lowered its 2016 global growth forecast to 2.4% from the January projection of 2.9%.

Developing countries that export commodities are having a tough time with soft prices. Naturally, the growth prospects in developing and emerging markets are bleak. Back home, manufacturers are suffering due to a strong dollar, which is increasing the price of their products. If the dollar continues its post-Brexit bull run, export prospects of U.S. manufacturers could be significantly hampered.

Utilities have been facing their own share of problems from increasingly stringent emission regulations and rate hike speculations. In Dec 2015, the Fed increased interest rates for first time since 2006 and stated plans to further raise the same as and when conditions are suitable.

On the brighter side, the U.S. economy is seeing definite signs of improvement, which prompted Fed chair Janet Yellen to reconsider a rate hike in the near future. And, as we know, a high-rate environment typically hurts the prospects of utility companies.

By their very nature, utilities routinely seek help from capital markets for upgrades and maintenance of their infrastructure. Even though regulated utilities are known for their cash generating capacity, funds generated from their internal operations are often less than enough to execute long-term projects. This means that a rise in interest rates will increase the cost of capital for utilities.

However, turmoil in the global economy could divert investor focus toward domestically oriented utilities, which are immune to the international market volatility and impact of the strong dollar. The year-to-date return from Dow Jones Utility Average (DJU) was 15.4%, compared with the S&P 500’s 6.2%. We have considered five utilities that are likely to provide solid returns in September.

Picking the Right Stocks

Recognizing a stock with good prospects is no mean feat. But thanks to our new Style Score System , we have been able to identify a few stocks with incredible near-term growth potential.

Our research shows that stocks with a VGM score of ‘A’ or ‘B’, when combined a Zacks Rank #1 (Strong Buy) or #2 (Buy), offer the best investment opportunities for investors.

Spark Energy, Inc. (NASDAQ:SPKE) is an independent retail energy services company. The company is involved in the retail distribution of natural gas and electricity.

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This Zacks Rank #1 stock, with a VGM Score of A, registered a positive earnings surprise of 3.50% in the last reported quarter and has returned 39.9% year to date.

Otter Tail Corporation (NASDAQ:OTTR) is involved in the electric, manufacturing and plastics business across the U.S., Canada, Mexico and Panama.

This Zacks Rank #2 stock, with a VGM Score of B, reported a positive earnings surprise of 7.90% in the last reported quarter and the stock has returned 28.6% year to date.

Nippon Telegraph and Telephone Corporation (NYSE:NTT) , along with its subsidiaries, provides fixed and mobile voice-related services, IP/packet communications services, and other telecommunications-related services in Japan and other countries.

This Zacks Rank #1 stock with a VGM score of A has returned 10.8% year to date.

Korea Electric Power Corporation (NYSE:KEP) an integrated electric utility company that generates, transmits and distributes electricity in Korea and other countries.

This Zacks Rank #2 stock with a VGM score of A has returned 22.1% year to date.

Companhia Energética de Minas Gerais S.A., (NYSE:CIG) through its subsidiaries, engages in the generation, transmission, distribution and trading of electricity in Brazil.

This Zacks Rank #2 stock with a VGM score of A has returned 78% year to date.