Utilities: With Stocks Up Year to Date, Sector Is Delivering on Growth

Even after two consecutive years of market-beating, double-digit returns, utility stocks keep climbing. As of March 23, the Morningstar US Utilities Index is up 5.25% in 2026 so far, and it has nearly doubled from its October 2023 bottom, including dividends. This extends utilities’ best two-year performance in 20 years.

Valuations appear to be the biggest headwind for utilities. Earnings growth remains strong, balance sheets are healthy, and dividends are secure. We think valuations climbed too high last summer, but the pullback at the end of 2025 has rightsized some of those valuations.

We consider the sector 7% overvalued as of late March. With utilities’ average dividend near historic lows at 3% and P/E multiples above long-term averages, investors have little protection if growth prospects disappoint.

We expect 7% annual earnings growth for most utilities through 2030, based on secular trends such as clean energy growth, data center energy demand, manufacturing onshoring, and economywide electrification. Most utilities are planning for the most energy demand growth and capital investment to be seen in several generations. If earnings growth continues and utilities stocks pull back some more, investors should be ready to buy.

Utilities’ 3% average dividend yield is an all-time low, signaling the market’s focus on growth over yield. Data center growth opportunities continue to expand across the sector. Finding ways to allocate infrastructure costs to data centers while addressing affordability concerns for all customers is a key challenge for utilities. Execution will be critical for utilities to maintain their historically rich valuations.

Top Utilities Sector Picks

Edison International

• Fair Value Estimate: $81.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

Investors’ overwhelming concern remains Edison’s EIX potential liabilities associated with the January 2025 Eaton fire. The stock has rebounded from its 2025 lows but hasn’t yet reached its pre-fire level. Management has acknowledged that shareholders could face material losses, but it could be late 2026 or beyond before there are any realistic loss estimates. Edison should have access to California’s $21 billion AB 1054 Wildfire Fund and the $18 billion expansion enacted in 2025 for future fire liabilities, resulting in minimal shareholder losses. Edison’s plan to invest $8 billion annually supports our 7% average annual earnings growth outlook.

Portland General Electric

• Fair Value Estimate: $56.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Low

We think investors are overestimating the impact of regulatory and policy uncertainties in Oregon, which has long been a challenging regulatory environment for utilities. However, recent regulatory reviews have been constructive, electricity demand from the technology sector is growing rapidly, and state renewable energy mandates offer plenty of growth investment. Portland General Electric POR management’s $7.6 billion investment plan for 2026-30 should push annual earnings growth above 6% with upside if state regulators approve more renewable energy projects later this year.

WEC Energy Group

• Fair Value Estimate: $112.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Low

We expect WEC Energy WEC to invest $37.5 billion through 2030, which includes its investment in American Transmission. The company’s capital investment program is expected to support accelerating electricity demand. New demand is anticipated to come from economic development in southeastern Wisconsin, particularly new data centers. An additional data center campus north of Milwaukee should contribute to demand growth. This investment plan supports our forecast that the company will be at the high end of management’s 7%-8% annual earnings growth target.