Utility stocks are gaining attention from investors as they represent stable opportunities in a fluctuating market. These publicly traded companies provide essential services such as electricity, natural gas, and water. Recent insights from Deloitte’s 2026 Power and Utilities Industry Outlook highlight that electricity demand in the United States rose in 2025, primarily driven by industrial electrification, artificial intelligence workloads, and transportation needs. Looking ahead, peak demand is projected to increase by 26% by 2035.
The report indicates that by 2030, industrial electrification could contribute an additional 25 GW of capacity, with data center energy consumption expected to soar to 176 GW, five times the levels recorded in 2024. Although 93% of new electricity capacity installed through July 2025 will come from renewable sources, the expansion of supply is hindered by over 2 terawatts trapped in interconnection lines. The reliability of the power grid faces challenges, particularly after 15 natural disasters in the first half of 2025 caused damages exceeding $1 billion.
As the energy landscape evolves, utility companies are focusing on expanding their firm capacity. By 2030, an estimated 209 GW of new capacity will be added to offset 104 GW of retirements from coal and gas plants. Recent regulatory changes have raised compliance standards while reducing incentives for green energy, prompting utilities to prioritize reliable power generation.
Investors are particularly interested in utility stocks that have proven profitable, especially those favored by hedge funds. A recent analysis involved filtering through Exchange-Traded Funds (ETFs) and using Yahoo Finance data to identify stocks with a trailing twelve months (TTM) net income greater than $1 billion and a net income margin exceeding 15%. The following eight companies emerged as the most attractive investments.
1. NextEra Energy, Inc. (NYSE: NEE)
TTM Net Income: $7.21 billion
TTM Net Income Margin: 20.81%
Number of Hedge Fund Holders: 72
NextEra Energy, Inc. has garnered significant attention from analysts. Jefferies recently raised its price target for the company to $88 from $85, maintaining a hold rating. Their updated earnings projections indicate that profits per share may grow at an annual rate of approximately 9% through 2032, surpassing the consensus forecast of 7.6%.
2. Duke Energy Corporation (NYSE: DUK)
TTM Net Income: $4.92 billion
TTM Net Income Margin: 15.97%
Number of Hedge Fund Holders: 62
Duke Energy has faced recent adjustments in its price targets, with UBS reducing its objective from $135 to $126 while maintaining a neutral rating. Similarly, Morgan Stanley lowered its target to $126 from $133. The company applied for an early site permit for a nuclear project in North Carolina, which aims to enhance future power generation reliability.
3. The Southern Company (NYSE: SO)
TTM Net Income: $4.46 billion
TTM Net Income Margin: 15.42%
Number of Hedge Fund Holders: 58
The Southern Company’s stock has seen adjustments, with Morgan Stanley downgrading its rating from equal weight to underweight and reducing its price target from $97 to $81. The firm suggested that utility performance will be influenced by data center demand and regulatory risks during the upcoming election year.
4. American Electric Power Company, Inc. (NASDAQ: AEP)
TTM Net Income: $3.66 billion
TTM Net Income Margin: 17.23%
Number of Hedge Fund Holders: 56
Analysts predict that American Electric Power will experience earnings growth driven by a projected retail power load increase of nearly 9%. The company has received mixed ratings, with UBS maintaining a sell rating while reducing its price objective from $114 to $107.
5. American Water Works Company, Inc. (NYSE: AWK)
TTM Net Income: $1.11 billion
TTM Net Income Margin: 21.93%
Number of Hedge Fund Holders: 53
American Water Works is expanding its operations through strategic acquisitions. Recently, its subsidiary, New Jersey American Water, purchased the Hopewell Borough water system for $6.4 million, a move approved by local voters. The company plans to invest in infrastructure improvements to enhance service reliability.
6. Sempra (NYSE: SRE)
TTM Net Income: $2.11 billion
TTM Net Income Margin: 15.75%
Number of Hedge Fund Holders: 41
Sempra is facing regulatory challenges that could impact its earnings. A recent regulatory filing indicated a potential after-tax charge of $471 million in response to a regulatory decision affecting its San Diego Gas & Electric subsidiary. Analysts maintain a cautious outlook on the stock, with UBS reducing its price objective from $98 to $96.
7. Dominion Energy, Inc. (NYSE: D)
TTM Net Income: $2.61 billion
TTM Net Income Margin: 16.79%
Number of Hedge Fund Holders: 35
Dominion Energy’s Coastal Virginia Offshore Wind Project has recently faced a development halt ordered by the U.S. Department of the Interior. The company argues that this project is essential for meeting growing energy demands and maintaining national security. The firm warns that delaying the project could lead to job losses and increased energy costs.
8. Ameren Corporation (NYSE: AEE)
TTM Net Income: $1.41 billion
TTM Net Income Margin: 16.34%
Number of Hedge Fund Holders: 34
Analysts have varied opinions on Ameren, with UBS maintaining a buy recommendation while adjusting its price target from $121 to $115. The company has revised its long-term EPS growth guidance to a compound annual rate of 6% to 8% through 2029.
Investing in utility stocks can offer a blend of stability and growth, particularly as the energy landscape evolves. The eight companies highlighted above represent some of the most profitable opportunities in the sector, reflecting strong financial performance and strategic growth initiatives.
