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.
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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.
