Editor’s Note: Today’s article breaks down 5 utility stocks positioned for durable long-term returns at the moment AI, electrification, and grid modernization are driving the biggest U.S. electricity demand surge in two decades. Robert Rapier covers exactly these companies full-time in Utility Forecaster. See his current top picks and Best Buys list →

One of the biggest mistakes investors make with utilities is chasing yield while ignoring durability.

A high yield can look attractive for a quarter or two, but over a full market cycle, the utilities that consistently outperform are usually the ones that combine three characteristics: stable cash flow, constructive regulation, and disciplined capital allocation. Those are the traits that allow a company to steadily expand its rate base, grow earnings, and support rising dividends year after year.

That philosophy has long guided our approach in Utility Forecaster (UFO). We are not trying to chase the hottest momentum trade in the sector. We are looking for companies that can continue compounding shareholder value through recessions, inflation spikes, interest-rate cycles, and commodity volatility. (If you want to see the top picks I’m currently recommending, click here to see my Best Buys list).

The utility sector rewards patience. But it especially rewards companies that can convert infrastructure spending into predictable long-term earnings growth.

In today’s market, where artificial intelligence, electrification, grid modernization, and industrial reshoring are all increasing power demand, the utilities with the strongest underlying business models may be entering one of the best long-term environments the sector has seen in years.

You do not need to own every utility stock to benefit from that trend. In fact, a small number of high-quality operators often illustrate exactly what makes the sector work over time.

Here are five utility companies that embody many of the same characteristics we emphasize in the UFO strategy.

Fortis (NYSE: FTS)

Fortis is one of the clearest examples of regulated utility compounding done right.

Roughly 99% of the company’s assets are regulated, which dramatically reduces exposure to commodity swings and economic cyclicality. That stability allows management to focus almost entirely on long-term infrastructure investment and rate-base expansion.

The company’s current five-year capital plan is expected to increase its rate base at roughly a 7% annual pace through 2030. That growth supports management’s expectation for 4% to 6% annual dividend growth, extending one of the strongest dividend-growth streaks in the sector.

This is exactly the kind of predictability we favor in Utility Forecaster. When a utility operates in constructive regulatory jurisdictions and has clear visibility into future investment recovery, earnings growth becomes far more durable and far less dependent on economic conditions.

Fortis is not exciting. That is precisely the point.

Sempra (NYSE: SRE)

One of the most important themes in utility investing today is geographic exposure.

Some regions simply have much stronger long-term demand tailwinds than others, and Texas may be the single best example in the country right now. Population growth, industrial expansion, manufacturing reshoring, and AI-driven data center demand are all driving enormous electricity needs across the state.

Sempra benefits directly through its ownership stake in Oncor, the largest transmission and distribution utility in Texas.

That positioning gives the company exposure to one of the fastest-growing power markets in North America. Management expects its utility rate base to grow at an annual pace of roughly 11% through the end of the decade, supported by transmission expansion, grid modernization, and reliability upgrades.

This ties directly into a major UFO theme: utilities with visible long-term capital deployment opportunities tend to generate the most durable earnings growth.

Utilities do not grow because electricity sales suddenly spike overnight. They grow because regulators allow them to invest billions into infrastructure and then earn returns on that capital for decades.

Sempra sits squarely in that sweet spot.

Public Service Enterprise Group (NYSE: PEG)

Nuclear power has quietly become one of the most strategically valuable assets in the utility sector.

For years, investors largely ignored nuclear generation because growth prospects appeared limited. But the rise of AI and hyperscale data centers has changed the equation dramatically. Large technology companies increasingly need massive amounts of around-the-clock carbon-free electricity, and nuclear remains one of the few scalable solutions capable of providing it.

That creates a structural advantage for companies like Public Service Enterprise Group.

The company combines a strong regulated utility business in New Jersey with one of the country’s largest nuclear generation fleets. At the same time, federal production tax credits provide an additional layer of support for nuclear economics.

In many ways, PEG reflects another core principle behind the UFO strategy: owning infrastructure that becomes more valuable as the energy landscape evolves.

The market often focuses on near-term headlines. We prefer to focus on assets that are difficult to replicate and likely to become increasingly important over time.

Reliable baseload nuclear generation fits that description perfectly.

Edison International (NYSE: EIX)

Edison International demonstrates something investors sometimes overlook: a utility does not need a perfect history to become an attractive long-term investment.

Southern California Edison spent years under pressure from wildfire liabilities and regulatory uncertainty. Those concerns severely weighed on investor sentiment.

But over time, the company aggressively hardened its grid, installed thousands of miles of covered conductor, improved operational procedures, and benefited from California’s wildfire recovery framework.

Today, Edison is increasingly transitioning from a liability story back into a regulated infrastructure growth story.

That’s important because utility investing is often about identifying when risks are becoming more manageable while the market still prices the stock as though those risks remain fully intact.

Edison now has one of the larger capital investment pipelines in the sector, with plans to invest tens of billions through 2030 into transmission, reliability, and grid modernization.

That combination of improving risk profile and visible infrastructure growth is exactly the type of setup long-term income investors should pay attention to.

Consolidated Edison (NYSE: ED)

ConEd may be the ultimate “sleep well at night” utility.

Serving the dense New York metropolitan area gives the company one of the most stable customer bases in the country. Revenue decoupling mechanisms further reduce earnings volatility by insulating results from short-term fluctuations in energy usage.

That stability has allowed ConEd to increase its dividend for more than five decades.

Importantly, ConEd highlights something we often emphasize in Utility Forecaster: consistency matters more than excitement.

The strongest long-term utility investments are usually not the companies generating the most headlines. They are the ones steadily investing in infrastructure, maintaining balance-sheet discipline, and producing predictable cash flow year after year.

ConEd has been doing exactly that for generations.

The Bottom Line

The utility sector is changing rapidly. AI, electrification, industrial reshoring, and grid modernization are all creating enormous infrastructure demands that will require trillions of dollars in long-term investment.

But even in a changing environment, the underlying principles behind successful utility investing remain remarkably consistent.

We continue to favor companies with durable regulated cash flow, supportive regulatory environments, manageable balance sheets, and visible long-term capital investment opportunities. Those are the traits that historically produce the most reliable dividend growth and the strongest long-term total returns.

Whether it is Fortis’ regulatory stability, Sempra’s Texas growth exposure, PEG’s nuclear advantage, Edison’s operational turnaround, or ConEd’s consistency, these companies demonstrate the same broader principle: durable utility investing is ultimately about owning infrastructure that becomes more valuable over time.

The five companies I’ve highlighted today each reflect a different dimension of the same underlying thesis: durable regulated infrastructure, capital deployed into regulatory frameworks that earn predictable long-term returns, and growing structural demand from AI, electrification, and grid modernization. This environment is as favorable as anything I’ve seen in 36 years in this sector. In Utility Forecaster, I maintain two actively managed portfolios — Growth and Income — built entirely around these principles, and I’ve just updated my top 5 picks for new subscribers. See my current Best Buys and full portfolio holdings →