We recently published a list of 10 Most Profitable Utility Stocks to Buy Now. In this article, we are going to take a look at where Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) stands against other most profitable Utility stocks to buy now.
Utility companies supply basic utilities like water, gas, and electricity. The demand for these stocks’ services is often steady, even during recessions, which makes them defensive investments.
Morningstar energy and utilities strategists Travis Miller and Andrew Bischof see reasons to invest in utility companies, stating that while the 2024 surge paused in October as interest rates began to rise, utility stocks are still holding on to their stellar performance from the previous year. Most US utilities are trading near the estimates of their fair values as of mid-February.
Utility firms generally generate substantial dividends and appear to be expensive at present. Miller & Bischof stated:
“Utilities continue to grow their dividends at an impressive rate. Nearly all utilities have already announced dividend increases for 2025 or are on track to announce increases in the first quarter. We expect 5% median sectorwide dividend gro wth in 2025.”
According to JP Morgan’s report in 2024, utility stocks have become unanticipated market leaders, outperforming only the technology sector and yielding a total return of over 17%. The adoption of AI, the growth of data centers, the proliferation of EVs, and the outsourcing of manufacturing are the main drivers of this rally, which is aided by a rapid shift in the demand for electricity. Data centers alone already account for 4.5% of U.S. electricity usage, which is expected to rise to almost 8% by 2030 after two decades of stagnant demand. Given the growing number of extreme weather events, the U.S. electric grid, which is largely over a century old, is unprepared to handle this surge and will require significant investments in capacity, stability, and resilience. Businesses engaged in storage, grid upgrading, and generation stand to gain from this shift. The industry is trading at 18.7x projected earnings, which is 13% less than the broader market, showing that it will continue to be valuable even after the recovery. Utility dividend yields may become more attractive if interest rates decline, which could lead to more growth. Utilities present a strong alternative for investors looking to gain exposure to the expansion of AI-related infrastructure without following tech prices, supported by real demand and structural investment requirements.
The broader market’s utilities sector has performed well over a range of historical periods. The year-to-date return is 3.61%. In the last year, the sector’s return was strong at 17.65%. When considering longer periods, the annualized return is 1.86% for the first three years and 6.13% for the fifth. At 5.68%, the 10-year annualized profit is a little lower. The utilities sector exhibits steady growth in comparison to the overall market, with large short-term gains but a more moderate long-term return, showing its defensive nature and steadiness during volatile times. The resilience of the 5-year performance is noteworthy.
Utility stocks may be more secure than other sectors, but they are nevertheless vulnerable to a halt in expenditure on thirsty data centers. Long seen as market safe havens, utility equities are suddenly uncertain as artificial intelligence changes the demand for electricity. According to Scotiabank’s Andrew Weisel, “electricity is a very basic need for most individuals and most companies,” underscoring the industry’s longstanding resiliency. However, as U.S. consumption dominates the world and is expected to exceed 1,000 TWh annually by 2030, as per the IEA, this stability is becoming increasingly connected to AI-driven data centers. Earnings risks are increased by a slowdown in AI capital expenditures, such as a giant tech company owned by Bill Gates reducing some of its programs. Weisel cautioned that “investors will be skeptical,” while Nikki Hsu of Bloomberg Intelligence pointed out that “requests for rate hikes would be rejected by regulators” during a recession.
10 Most Profitable Utility Stocks to Buy Now
A sprawling hydroelectric power plant nestled high in the mountains.
For this list, we screened for utility companies with a net profit margin over 10%, which suggests sound financial health and excellent cost management. The stocks are ranked in ascending order of their net profit margin as of the most recent quarter.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Net Profit Margin: 25.83% Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is responsible for the generation, transmission, and marketing of electricity in Brazil. The business runs a variety of nuclear, thermal, hydro, and wind generating facilities across the country. Administration activities primarily represent the company’s cash management, the management of the mandatory loan, the management of business in SPEs, and other activities. Its segments include Generation, which involves the generation of electric energy, the sale of energy to distribution companies and free consumers, and commercialization. The stock went up by more than 11% YTD, and the net profit margin increased by 25.83%, making it one of the Best Utility Stocks. Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) has embarked on a new phase of development after its privatization was approved, emphasizing customer trust, disciplined management, and great performance. The firm achieved a 50% reduction in mandatory loan provisions, from BRL26 billion to BRL13.6 billion, showing significant progress in financial management. A record BRL4 billion dividend payout was announced, pointing to better financial outcomes. A unified structure and improved risk management let it reach 700 free energy clients, thus growing its customer base. The business has made significant investments in energy infrastructure, including BRL14 billion for new projects, including Transnorte Energia and the Coxilha Negra wind farm. As part of its restructuring efforts, Eletrobras hired 2,100 new workers and cut operational expenses to BRL6.784 billion.
Overall, EBR ranks 5th on our list of the 10 Most Profitable Utility Stocks to Buy Now. While we acknowledge the potential of Utility companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than EBR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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