2 ASX utility stocks that are smart buys for Aussies in November

These two could be standouts, according to top brokers.

| More on:
A happy woman flies with arms outstretched on her boyfriend's back on the beach at dusk.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX utility stocks have presented a mixed bag this year in a world where global equity markets have roared to new highs.

Despite the likes of gold and tech shooting higher this year, the ASX utilities basket has only managed to climb 3%. This is more than six points behind the broader market.

However, utility stocks typically offer a beacon of stability to the portfolios of equity investors. Moreover, they pay hefty dividends at the right time in every cycle.

Because they provide essential services like electricity and gas, these businesses ensure consistent demand regardless of economic cycles. In other words, it's unlikely they will disappear anytime soon.

For Aussie investors seeking reliable returns and potential growth, two ASX utility stocks that stand out are Origin Energy Ltd (ASX: ORG) and Santos Ltd (ASX: STO).

Here's why experts say these energy giants could be a solid addition to your portfolio.

What makes Origin Energy a smart buy?

Origin Energy is one of Australia's leading energy providers, supplying electricity, gas, and renewable energy solutions to millions of customers nationwide.

Origin provides about 30% of the East Coast's gas supply through its Australian Pacific LNG (APLNG) venture.

Analysts at Citi have retained a buy rating on Origin Energy in a recent note, setting a price target of $11.00.

The ASX utility stock recently reported a strong first quarter, with electricity sales volumes increasing by 3% due to growth in retail customers and higher demand.

Gas volumes remained steady, balancing higher retail sales with a decrease in business volumes.

Additionally, Origin's international venture, Octopus Energy, added more than 600,000 customer accounts in the United Kingdom and international markets during the quarter.

The 'Kraken' platform, powering Octopus Energy, has now contracted 62 million customer accounts globally.

Goldman Sachs is also bullish on Origin, forecasting fully franked dividends per share of 48 cents in FY25, stretching up to 58 cents the year after.

Based on the current share price, this implies dividend yields of approximately 5% and 6% for the ASX utility stock, respectively.

Santos backed by brokers

Santos is another major Australian energy producer that supplies natural gas and liquefied natural gas (LNG) to Australian and Asian markets.

Despite some volatility in oil prices this year, several brokers suggest that Santos has strong fundamentals that make it a smart buy.

Ord Minnett has a buy rating on the ASX utility stock and a price target of $8.40. This suggests a 21% upside potential from its current share price.

The brokerage likes Santos's robust free cash flow outlook, underpinned by its key LNG projects, Pikka and Barossa.

Once operational, these projects are expected to generate a free cash flow yield of up to 20% for prospective investors.

Santos also recently secured a mid-term LNG deal with TotalEnergies, covering the supply of 20 LNG cargoes starting in late 2025.

Ord Minnett projects that Santos will pay dividends of 41 cents per share this year and 44 cents per share in 2025.

This equates to attractive dividend yields of 5–6% over the two years, respectively. This makes it a contender for investors seeking both current income and capital growth from ASX utility stocks.

ASX utility stocks takeaway

According to top brokers, investing in ASX utility stocks like Origin Energy and Santos could be a savvy move this November.

These stocks have been heavily sold this year, meaning prices are depressed relative to history.

Origin is up 12% in the past year, whereas Santos is 7% in the red.

Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Focused man entrepreneur with glasses working, looking at laptop screen thinking about something intently while sitting in the office.
Energy Shares

Are Santos shares a screaming buy?

Goldman Sachs thinks now could be a good time to buy this energy stock.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Energy Shares

What is getting investors excited about this ASX 200 uranium stock today?

There's a good reason why this share is charging higher on Wednesday.

Read more »

Businessman studying a high technology holographic stock market chart.
Energy Shares

Is this stock the 'best placed' of the ASX uranium shares?

This fund manager thinks so.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Why today is a big day for Santos shares

Why is everyone talking about Santos shares today?

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Energy Shares

This ASX 200 mining stock just reported a 40% earnings jump

Investors appear pleased with this miner's performance during the first quarter.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Energy Shares

Are beaten down Paladin Energy shares a bargain buy?

Bell Potter thinks this beaten down uranium stock could be worth picking up.

Read more »

Worker inspecting oil and gas pipeline.
Energy Shares

3 headwinds facing ASX 200 energy stocks in 2025

After a tough 12 months, what’s ahead for ASX 200 energy stocks in 2025?

Read more »

Man holding Australian dollar notes, symbolising dividends.
Energy Shares

Dividend investors: Top ASX energy shares for November

These are the energy stocks I would buy for dividend income.

Read more »