Key Takeaways:
(P1) Eight US utility stocks with high dividend yields could see a surprising benefit from sustained high gasoline prices, according to a new analysis from Citi Research.
(P2) "We estimate last month’s gasoline increase could shift ~6–7% of the average household’s 2026 combined energy bill from electricity to gasoline in most states, easing political pressure on utility bills ahead of the midterm elections,” Citi analysts Ryan Levine and Xinru Yin wrote on Wednesday.
(P3) The report highlights an opportunity for investors looking for defensive assets. The Utilities Select Sector SPDR ETF (XLU) offers a 2.6% yield, while a screen for individual names identified eight companies, including Exelon (EXC) and Consolidated Edison (ED), with above-average yields and below-average forward P/E ratios.
(P4) This dynamic could drive capital into the defensive utilities sector as political heat on electricity rates subsides. The shift would be most pronounced in New England, the Mid-Atlantic, Florida, and Texas, where utility bills form a larger part of total energy costs.
Chicago-based Exelon (EXC), which serves parts of the Mid-Atlantic, offers a 3.4% dividend yield and trades at 17 times forward earnings. While analysts forecast 3% earnings growth for 2026, that is expected to accelerate to 7% in the following year.
New York's Consolidated Edison (ED) boasts a 3.1% dividend yield and trades at 18 times forward earnings. Analysts expect its earnings to grow between 6% and 7% over the next two years. Other companies that fit the screen include Edison International, AES, Eversource Energy, DTE Energy, Public Service Enterprise Group, and Xcel.
The analysis suggests that as consumers feel more pain at the pump, their focus may be drawn away from rising electricity costs tied to other trends like data center construction, giving utilities more breathing room.
This thesis provides a defensive rotation play for investors concerned about broader market volatility. The combination of steady earnings, high dividend yields, and a potential easing of political pressure makes these utility stocks an attractive haven. Investors will be watching utility commission filings in the coming months for any changes in rate case aggressiveness.
This article is for informational purposes only and does not constitute investment advice.
