3 Top Utility Stocks to Buy in October

Normally, utility stocks aren't very exciting. But, after a magnificent 35% rally over the past year, well, the utility sector is no doubt exciting right now. In fact, some investors might be thinking that the sector isn't worth looking at anymore. That isn't really true if you spend a little time examining utilities like Constellation Energy (NASDAQ: CEG), NextEra Energy (NYSE: NEE), and Black Hills (NYSE: BKH) as October gets underway.

1. Constellation Energy is leading the nuclear renaissance

Clean energy is all the rage, with solar and wind power investment expanding at a rapid clip. But there's another clean energy option that often gets forgotten, nuclear power. Constellation Energy is a competitive power company (which means it sells electricity outside of the traditional regulatory framework) with ownership stakes in 14 nuclear power stations which contain 25 nuclear power units. This is important because nuclear power is in the news, for good reasons, right now.

A private company has just been awarded government funding to reopen a shuttered nuclear power plant. Now, Constellation Energy has begun the process of reopening a nuclear power plant at Three Mile Island, with Microsoft (NASDAQ: MSFT) agreeing to buy all of the power it produces for the next 20 years. To be fair, the stock shot up after management announced the news. But if nuclear power is about to become a more important energy source, Constellation Energy is probably one of the best ways to invest directly in the future of nuclear power. If you're interested in investing in popular trends, you should take a closer look at this utility right away.

2. NextEra Energy is growing its dividend very quickly

NextEra Energy isn't exactly a new story on Wall Street. In fact, the story behind this stock is so well known that the shares usually trade at a premium relative to peers. But if you are a dividend growth investor, that premium could be worth paying. Why? Because NextEra Energy's dividend has grown at a 10% annualized clip over the past one-, three-, five-, and 10-year periods.

The company is projecting that earnings growth of 6% to 8% through 2027 will keep the 10% dividend growth streak alive until at least 2026. Half that rate would be considered pretty good for a utility, so NextEra Energy truly stands out from the pack.

The reason NextEra Energy has been able to grow so quickly is twofold. First, it owns the largest regulated utility in Florida, Florida Power & Light. This foundational business has benefited from the long migration trend to the Sunshine State. More customers means more revenue and profits. On top of this solid core, NextEra Energy has built one of the world's largest solar and wind companies. That's the growth engine, and given the ongoing shift toward renewable power, there's likely to be a long runway ahead for additional growth.

If you have a value bias, you won't like NextEra Energy. But it is hard to beat when it comes to dividend growth.

3. Tiny Black Hills is a King when it comes to dividends

There's a good chance you have at least heard the names Constellation Energy and NextEra Energy. But you may not have heard of Black Hills, which wouldn't be shocking given its tiny $4 billion market cap. However, if you are a dividend investor trying to live off of the income your portfolio generates, you need to dig into Black Hills' story.

It is a fairly boring regulated natural gas and electric utility that serves 1.3 million customers in parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Notably, its customer base is growing nearly three times faster than the overall U.S. population. Black Hills expects this customer growth to support earnings growth of between 4% and 6% a year over the foreseeable future. As a result, the dividend should grow along with earnings over time.

This is where the story gets interesting because Black Hills has increased its dividend annually for 54 consecutive years. That makes this small fry a Dividend King, one of the few utilities to have achieved this impressive feat. Now add in a dividend yield of 4.2%, which is above the roughly 2.9% average for the utility sector and near the stock's highest yield levels over the past decade.

Black Hills stock has rallied, just like other utility stocks have. But it still looks like this reliable dividend payer is on sale. If you rely on the income your portfolio generates, this boring Dividend King could be a great addition to your portfolio in October.

There are still interesting options in the utility patch

To be fair, the utility sector's rally has reduced the attractiveness of the sector from a big-picture perspective. But that doesn't mean there aren't interesting opportunities if you dig a little deeper. Constellation Energy could be a huge beneficiary of what seems like a burgeoning nuclear renaissance, while NextEra Energy remains a dividend growth machine.

And Dividend King Black Hills is still adding years to its incredible dividend streak despite having a yield that is attractive compared to the utility sector and its own history. One of these unique stories is likely to tickle your fancy if you are looking for a utility stock to buy right now.

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Reuben Gregg Brewer has positions in Black Hills. The Motley Fool has positions in and recommends Constellation Energy, Microsoft, and NextEra Energy. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.