There’s a reason that the word “utilitarian” comes from the word “utility”. Utilities are not exactly the most exciting businesses, but they’re absolutely essential to modern life. So utility stocks are generally a pretty safe bet with good dividends, regardless of what the rest of the market is doing. But two in particular are trading at a discount relative to their sector right now, making them potentially excellent choices.

Dominion

Dominion has made some interesting choices in the past few years. First, the company sold its pipeline assets to Berkshire Hathaway. This led to a brief cut in dividends, but they soon bounced back. Then, in 2023, Dominion sold three natural gas utilities to Enbridge. The company didn’t cut dividends this time, but increases were put on hold. This resulted in a drop in share prices that has raised the yield to 5.4%, an excellent return for any utility. Dominion’s divestments appear to be complete, and the asset sales will help to reduce its debt load. The company is poised for strong new growth, especially given that it has operations in one of the top markets for power-hungry data centers.

Black Hills

Black Hills is an entirely uninteresting natural gas and electric utility that serves about 1.3 million people across eight states. But it’s currently paying about 4.9% in dividends, which is quite high for a utility, and there is still a lot of room to grow. Right now, stubbornly high interest rates are dampening Black Hills’ earnings growth. However, regulators are likely to take that into account when considering potential rate increases and investment plans, which can reduce the interest rate effects. Meanwhile, the Black Hills region’s population is exploding. This sets the utility up well for future growth and even higher dividends.

Neither Lisa Fritscher nor Stocks.News have positions in these companies.