The Best Utility Stocks of 2026
Until recently, investors considered utility stocks as “slow and steady” plays. While great for income-focused investors, they’re not exactly the cornerstone of younger, growth-focused investors’ portfolios. However, with the rise of generative artificial intelligence (GenAI), demand for electricity is rising. As this trend transforms utilities into growth plays, what are the best utility stocks to buy today?
Among major electric, gas, and water utilities, two stand out as strong names that benefit greatly from the aforementioned secular growth trends. Alongside these AI-related utility stocks stands a water utility with the longest dividend growth streak.
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The utility stocks in question are American States Water (NYSE: AWR), Constellation Energy Group (NASDAQ: CEG), and NextEra Energy (NYSE: NEE).
American States Water: 71 consecutive annual dividend increases (and counting)
American States Water owns several utility companies, most notably Golden State Water Company. It serves over 1 million customers across 10 states. While American States Water’s size and scale pale in comparison with the similarly named American Water Works, you may want to buy this water utility over the other.
American States Water is one of the Dividend Kings, or stocks with more than 50 consecutive years of dividend growth. The stock has the longest dividend growth streak among U.S.-listed stocks. The company has increased its dividend each calendar year for 71 consecutive years.
American States Water may have only a 2.5% yield, but between its dividend growth track record, and the company’s goal of a 7% annualized dividend growth rate moving forward, this utility could deliver steady and strong total returns in the years ahead.
Constellation Energy Group is embracing the AI revolution
Electric utilities may be benefiting from electricity growth stemming from the proliferation of AI data centers, but among electric utility stocks, Constellation Energy Group may be the one with the strongest AI catalyst. So far, the tech industry has secured an electricity supply where it can, regardless of whether it comes from fossil fuels or renewable sources.
However, in the long term, locking in clear energy sources will become a much greater priority. That’s good news for Constellation. It owns the largest fleet of nuclear facilities in the United States. Nuclear energy was previously shunned for safety reasons, but big business and public opinion have been shifting, mainly because of its greater scalability compared to wind or solar energy.
Since it’s trading for 26 times forward earnings, AI-related growth at first appears already accounted for in the stock’s valuation. Even so, as the AI data center trend remains in motion, Constellation remains poised to live up to forecasts calling for annualized earnings growth of around 20%. If this happens, the stock could sustain this valuation, or perhaps even experience a further rerating.
NextEra is another utility with AI and “green wave” catalysts
NextEra Energy is the parent company of Florida Power & Light. Owning a utility in a fast-growing state has contributed to its strong performance in recent years, but so too has the company’s aggressive pivot toward generating electricity via renewable sources.
Through its NextEra Energy Resources unit, the company has been building renewable and natural gas power plants across the U.S. Although the company initially intended to capitalize on the “green wave,” or a major pivot toward the generation and use of clean energy, NextEra is now capitalizing on another tailwind: the AI data center growth trend.
After the stock got out of its early 2020s slump, shares have nearly doubled in price in less than three years. Better yet, further upside may be in the cards for this renewable energy stock. For one, management anticipates annualized earnings growth of around 8% between now and 2035. This could help sustain the stock’s mid-20s forward earnings multiple, with shares continuing to rise in line with increased earnings. Earnings growth also points to continued dividend growth. The dividend, currently at around 2.6%, has increased 32 years in a row.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy and NextEra Energy. The Motley Fool has a disclosure policy.
The Best Utility Stocks of 2026 was originally published by The Motley Fool