The 4 Highest-Yielding S&P 500 Utility Stocks Are Strong 2026 Buys After Big Pullback

"The S&P 500 utilities sector had gained well over 15% in 2025, before rolling over in mid-October. After hitting a high of 471, the sector has traded back to the 434 level, offering investors a new chance to own the top stocks in the industry. It is important to remember that as the S&P 500 approaches its third consecutive year of double-digit gains, a correction could be on the way in 2026."

"However, history shows that stodgy utility stocks are likely to hold their ground much better than high-flying technology stocks, especially those chasing the artificial intelligence mania. Oddly enough, AI and data center growth are becoming a massive tailwind for the utility sector, as power demand surges, allowing utility stock investors to participate in technology without the associated risk. With a product always in demand, high-yielding utilities may be the best option now for cautious investors seeking passive income."

"Large hyperscale data centers, which are increasingly common, require the power of 100 megawatts or more, equivalent to the annual electricity consumption of around 350,000 to 450,000 electric cars. This skyrocketing demand is expected to continue as AI adoption grows. A significant portion of data center energy consumption is attributed to cooling systems that maintain optimal operating temperatures. Big tech will continue to find solutions for this issue."

S&P 500 utilities rose over 15% in 2025 before rolling over from a 471 high to roughly 434, creating a renewed buying opportunity. The S&P 500 approaches a third consecutive year of double-digit gains, raising the prospect of a 2026 correction that could impact equities. Utilities generally hold up better than high-flying technology stocks during downturns. Rapid AI and data center growth is driving substantial new power demand, providing a growth tailwind for utilities and a lower-volatility way to capture tech-related demand. Hyperscale data centers often require 100+ megawatts, with cooling consuming a significant share of energy. Utilities rank among the most recession-resistant sectors. A screen of the S&P 500 utility sector identified four high-yield companies based in the South and Midwest near operating data centers.

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