Utility stocks are on a tear as an 'energy transition supercycle' lifts the entire sector

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Power generators have come roaring back to life this year, despite an environment of higher-for-longer interest rates that raises their borrowing costs.

These are not your grandparents' power-and-light utility companies. The sector has come roaring back to life this year, defying an environment of higher-for-longer interest rates that would normally act as a headwind by raising the capital-intensive companies' borrowing costs. Utilities as a group are up 18% over the past three months, far outpacing the broader S & P 500 as well as even technology stocks. Vistra Corp.

Utilities are surging from 2% to 4% growth to rates of 6% to 8% or higher, he said. "That's a huge acceleration of growth, and it's just scratching the surface," Pourreza said. The high levels of growth combined with yields of 3% to 4% means utilities could see 10% to 12% annual returns, he said.

 

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