Utility Stocks for Higher Rates That Still Offer Steady Dividends

With Fed Chair Kevin Warsh signaling higher interest rates are likely to stick and the S&P 500 already up 10% in 2026, many investors are rethinking how they balance income, risk, and rate sensitivity. Stable dividend paying utility stocks sit at the crossroads of those questions, often seen as potential sources of consistent cash flow but also exposed to funding costs and inflation. This article focuses on 3 utility stocks from our Stable Dividend Paying Utility Stocks screener that appear positively exposed to the latest Fed signals. It is designed to help you judge whether they deserve a closer look or a place on your watchlist.

SSE (LSE:SSE)

Overview: SSE is a UK based utility that generates power from wind, hydro and thermal plants, runs electricity transmission and distribution networks, and supplies energy and related services to homes and businesses.

Operations: SSE generates most of its revenue from SSE Energy Markets at £7.5b and its Thermal and Energy Customer Solutions segments at about £5.1b and £4.9b respectively. It also receives additional contributions from Renewables, Distribution, Transmission and Corporate activities, predominantly across the UK at £7.9b and Ireland at £2.2b.

Market Cap: £29.2b

SSE is notable in a higher for longer rate environment because it combines regulated UK electricity networks, which can provide relatively predictable, inflation linked cash flows, with a portfolio of renewables and grid assets tied to the energy transition. Earnings and revenue forecasts indicate faster growth than the wider UK market, yet the stock trades on a premium P/E and above some cash flow estimates, so expectations are already demanding. High debt and dividends that are not fully backed by free cash flow also create pressure on the income profile. For investors prepared to weigh those trade offs carefully, SSE may be one of the more interesting utilities to study in detail.

SSE’s mix of inflation linked networks and energy transition assets looks powerful. However, the real story sits in the detailed cash flow, debt and dividend trade offs inside the analysis report for SSE

Southwest Gas Holdings (SWX)

Overview: Southwest Gas Holdings is a US regulated utility that purchases, transports, and distributes natural gas to around 2.3 million residential, commercial, and industrial customers across Arizona, Nevada, and California.

Operations: Southwest Gas Holdings generates its revenue primarily from Natural Gas Distribution, which contributed about US$1.8b.

Market Cap: US$6.7b

Southwest Gas Holdings is notable in a higher-for-longer rate backdrop because it combines fully regulated gas distribution, where regulators focus on safe and reliable service, with a long operating history and a dividend that management aims to grow responsibly. Recent comments from leadership highlight constructive regulatory environments and planned US$2.4b of capital spending through 2026. However, the stock also carries clear trade offs, including a relatively high P/E, dividends not covered by free cash flow, and meaningful reliance on external borrowing. For income focused investors who want exposure to essential gas infrastructure, an important consideration is how those regulatory supports, network investments, and balance sheet risks compare when evaluated against Fed Chair Warsh’s hawkish stance and prolonged higher funding costs.

Southwest Gas Holdings’ regulated cash flows and planned US$2.4b capex could be masking a bigger story around its funding and dividend trade offs, so it is worth unpacking the 1 key reward and 2 important warning signs (1 is major!)

UGI (UGI)

Overview: UGI is a Pennsylvania based utility and energy distributor that supplies natural gas, electricity, propane, and liquefied petroleum gas to customers in the US and overseas, combining regulated utility operations with propane distribution and midstream energy services.

Operations: UGI generates most of its revenue from AmeriGas Propane at about US$2.2b, UGI International at roughly US$2.0b, Utilities at around US$2.0b, and Midstream & Marketing at approximately US$1.7b, with smaller segment adjustments and eliminations.

Market Cap: US$8.0b

UGI sits at an interesting crossroads for income focused investors in a higher for longer rate world. It offers a 4.02% dividend yield, a long operating history in regulated gas and power, and recent earnings of US$520m for Q2 2026 and US$817m for the first half. However, it also carries meaningful external debt, modest 8.7% net margins, and dividends that are not fully backed by free cash flow. Regulatory decisions in Pennsylvania and investments in grid modernization, renewable natural gas projects, and distributed energy solutions are central to the story in a market where funding costs are unlikely to fall soon. The real question is how those potential improvements balance against slower revenue growth, fossil fuel transition risks, and a stock price sitting above some cash flow estimates.

UGI’s 4.02% yield and recent US$817m first half earnings could be masking a bigger story around debt, margins, and the energy transition, so the full picture sits inside the 4 key rewards and 2 important warning signs (1 is major!)

The three utilities covered here are just a starting point, as the full Stable Dividend-Paying Utility Stocks screener on Simply Wall St surfaced 24 more companies with income profiles, balance sheets, and risk trade offs that could be just as compelling as the stocks already discussed, all grouped inside the Stable Dividend-Paying Utility Stocks screener. To identify and analyze the highest conviction ideas for your own portfolio, Simply Wall St lets you filter this universe by the specific catalysts and narratives that matter to you, from dividend coverage and balance sheet strength to regulatory exposure and interest rate sensitivity.

Take Control of Your Investment Journey

If Southwest Gas Holdings or any of these companies sound like a great opportunity, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value the ideal entry point. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Seeking Alternatives Before The Crowd Moves

Fresh ideas can gain attention quickly, and attractive entry points may not last long. Before the next breakout gathers momentum and moves beyond your reach while still under the radar, consider acting promptly.

• Spot resilient payout machines while they are still flying under most radars by screening for 5 dividend fortresses built on strong cash flows and durable business models.
• Position ahead of the next infrastructure upgrade cycle by scanning a curated 35 power grid technology and infrastructure stocks that could benefit if grid spending accelerates during key periods.
• Explore the next wave in automation by focusing on a hand picked 34 robotics and automation stocks universe before the strongest stories gain full momentum and pricing becomes less favorable.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com