Buy 5 Low-Beta High-Yielding Stocks Amid Sagging Consumer Sentiment

On March 14, the University of Michigan reported that its Consumer Sentiment Index for mid-March plunged to the lowest level since November 2022. Uncertainty regarding the Trump administration’s tariffs and trade policies, and their impact on the U.S. economy, especially on an already-elevated inflation rate, rattled market participants’ sentiments. 

Moreover, signs of cracks in a resilient labor market, dwindling personal spending reflected in lower-than-expected retail sales, prolonged softness in the manufacturing sector, the Fed’s ambiguity about further lowering interest rates anytime soon, extreme volatility on Wall Street and the fear of a near-term recession plummeted investors’ sentiment.

At this juncture, one should safeguard its portfolio investing in low-beta high-yielding stocks. Here we recommend five such stocks with a favorable Zacks Rank from the defensive utility sector. These are Ameren Corp. AEE, Atmos Energy Corp. ATO, American Water Works Co. Inc. AWK, Entergy Corp. ETR and NiSource Inc. NI. 

Consumer Sentiment Plunges in Mid-March

The University of Michigan reported that the preliminary reading for consumer sentiment Index in March came in at 57.9, significantly below the consensus estimate of 63.2 and the final reading of 64.7 in February. 

The sub-index for current economic conditions tumbled to 63.5 in March from 65.7 in February and 82.5 in March 2024. The sub-index for consumer expectations plummeted to 54.2 in March from 64 in February and 77.4 in March 2024. 

The short-term (one year) inflation outlook spiked to 4.9% in March from 4.3% in February, marking the highest reading since November 2022. The long-term (5 to 10 years) inflation outlook surged to 3.9% in March from 3.4% in February, marking the highest reading since February 1991. 

Why Low-Beta High-Yielding Stocks

At this juncture, investment in low-beta stocks with a high dividend yield and a favorable Zacks Rank will be the best option. If markets regain momentum, the favorable Zacks Rank of these stocks will capture the upside potential. However, if the downtrend continues, low-beta stocks will minimize portfolio losses and dividend payments will act as a regular income stream.

Why Utility Sector

Utilities are mature and fundamentally strong as demand for such services is generally immune to the changes in the economic cycle. Such companies provide basic services like electricity, gas, water and telecommunications, which will always be in demand. 

Consequently, adding stocks from the utility basket usually lends more stability to a portfolio in an uncertain market condition. Moreover, the sector is known for the stability and visibility of its earnings and cash flows. Stable earnings enable utilities to pay out consistent dividends that make them more attractive to income-oriented investors.

5 Low-Beta High-Yielding Utility Stocks to Buy

These five low-beta (beta >0<1) high-yielding (dividend yield more than 2%) stocks have strong growth potential for 2025. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

Ameren Corp.

Ameren has been making systematic investments in infrastructural upgrades to improve its customer reliability. AEE aims to spend up to $26.3 billion during the 2025-2029 period to further strengthen its existing operation. AEE’s strong performance should enable its management to reward its shareholders with solid dividend payouts.

Ameren has been investing steadily to offer electricity through cleaner and more diverse sources of energy generation, such as solar, wind, natural gas, hydro and nuclear power. Apart from investing in renewable projects, AEE is also closing its coal-fired plants to reduce carbon dioxide emissions and promote green energy. 

To this end, AEE retired its Rush Island coal-fired energy center in October 2024 and extended the retirement date of the Sioux coal-fired energy center from 2030 to 2032. AEE aims to retire all of Ameren Missouri’s coal-fired energy centers by 2042.

Ameren has expected revenue and earnings growth rates of 6% and 6.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. AEE has a beta of 0.48 and a current dividend yield of 2.90%.

Atmos Energy Corp.

Atmos Energy continues to benefit from rising demand for natural gas, courtesy of an expanding customer base. ATO’s long-term investment plan should further increase the reliability of its natural gas pipelines. 

ATO gains from industrial customer additions and constructive rate outcomes. Returns within a year of capital investment should further boost its performance. ATO has enough liquidity to meet its near-term debt obligations.

ATO has been expanding its renewable natural gas (“RNG”) operation to help its customers achieve their environmental objectives. It now has seven flowing RNG facilities directly connected to the system. 

Atmos Energy also executed interconnect agreements with three additional RNG projects. ATO’s RNG strategy is built on partnerships with landfills, dairies and others to transport waste-derived energy to fuel homes, businesses and even vehicles.

Atmos Energy has expected revenue and earnings growth rates of 18.2% and 5.1%, respectively, for the current year (ending September 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. ATO has a beta of 0.67 and a current dividend yield of 2.37%.

American Water Works Co. Inc.

American Water Works has been gaining from contributions from acquired assets and military contracts. New water and wastewater rates implemented in its service region are also boosting performance. 

AWK continues to expand its operations through organic and inorganic initiatives. The long-term capital expenditure of AWK is to strengthen its infrastructure and serve an expanding customer base.  The decline in interest rates will reduce project expenses and boost margins. AWK has ample liquidity to meet its debt obligations.

American Water Works is expanding its customer base through organic initiatives and acquisitions.  American Water Works’ pending 17 acquisitions (as of Jan. 1, 2025), when completed, will add another 24,200 customers to its customer base. Acquisitions allow AWK to get fresh demand for its services and expand its revenue stream.

American Water Works has expected revenue and earnings growth rates of 1.1% and 5.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. AWK has a beta of 0.69 and a current dividend yield of 2.15%.

Entergy Corp.

Entergy boasts a detailed capital investment plan to modernize, decarbonize and diversify its portfolio. ETR plans to invest $37 billion during 2025-2028 to upgrade its distribution and transmission and support renewable expansion. 

Returns from these investments should enable ETR to duly achieve an earnings CAGR of more than 8% over the 2025-2028 period and add more than 6,000 MW of renewable capacity by 2026-end.

ETR has also been investing significantly in grid hardening to make its transmission and distribution systems more resilient, thereby improving customer service. To this end, it is imperative to mention that in January 2025, the Public Utility Commission of Texas unanimously approved Phase I of Entergy Texas’s Texas Future Ready Resiliency Plan, which is comprised of investments worth $335.1 million.

Entergy has expected revenue and earnings growth rates of 5.5% and 6.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. ETR has a beta of 0.68 and a current dividend yield of 2.90%.

NiSource Inc.

NiSource expects to invest $19.4 billion during 2025-2029 to modernize infrastructure, which will enhance the reliability of its operations. Within 18 months, nearly 75% of NI’s investment was recovered through rate hikes to carry on infrastructure upgrades. NI has enough liquidity to meet debt obligations.

NiSource continues to add clean assets to its portfolio and retire coal-based units. The company is set to retire its 100% coal-generating sources between 2026 and 2028 and replace the production volumes with reliable and cleaner options at lower costs. 

NiSource aims to reduce greenhouse gas emissions by 90% within 2030 from the 2005 levels. This initiative can help NI lower the cost of operations by focusing on new and advanced assets. New products and services can lead to added revenue streams.

NiSource has expected revenue and earnings growth rates of 11.1% and 9.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 30 days. NI has a beta of 0.50 and a current dividend yield of 2.90%.

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This article originally published on Zacks Investment Research (zacks.com).

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