The liquidity party punch bowl is gone and will not be returning any time soon. Profligate and wasteful government spending, and way too much liquidity as rates were kept near or at zero for years, has created an inflation monster, and a Federal Reserve that is way behind the curve had no choice but come out blasting this month. The 75-basis-point increase in the federal funds rate last week is likely to be followed by another one in July, if the spiraling inflation does not start to improve.
While a big Tuesday rally was a welcome relief to investors, the bottom line is that this was likely yet another oversold bear market rally. The reality for investors is that interest rates increases and inflation will continue, and history says it will not be pretty.
Surprisingly, the utilities also were caught up in the selling, losing a stunning 9.2% last week. That may be offering worried investors a sparkling entry point to a sector that typically is considered the proper and safe place for widows and orphans to be. With temperatures around the country spiking higher than usual, you can bet the demand for electricity will jump.
We screened our 24/7 Wall St. utility research database, looking for the top companies that pay big and reliable dividends with stocks rated Buy at top firms across Wall Street. We found seven companies that look like outstanding ideas for worried investors.
American Electric Power
This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states.
The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which also will be accretive.
American Electric Power stock investors receive a 3.53% dividend. Morgan Stanley has a $113 price target, while the consensus target is $107.79. Shares closed on Tuesday at $89.95.
Atmos Energy
This utility stock is perfect for conservative investors looking for income. Atmos Energy Corp. (NYSE: ATO) engages in the regulated natural gas distribution and pipeline and storage businesses in the United States.
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