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Investing.com -- The UK utility sector offers investors a mix of income and growth potential despite ongoing market volatility. Recent rankings from WarrenAI have identified standout performers that combine attractive dividends with significant upside potential. Here’s a closer look at the top performers in this defensive sector that continues to attract investor attention.
Telecom Plus Plc leads the pack with its rare combination of high yield and growth potential. Drax Group follows with compelling value metrics, while ReNew Energy brings renewable growth exposure. Rounding out the list is Severn Trent , offering blue-chip stability despite premium pricing.
Telecom Plus PLC (LON:TEP)
Telecom Plus tops the rankings as the yield-and-upside champion of the UK utility sector. Currently priced at £1,792.48, WarrenAI analysis indicates a substantial 26.1% fair value upside alongside an attractive 5.0% dividend yield. The company demonstrates exceptional profitability with a 31.4% return on equity. Analysts are particularly bullish, projecting a 44.9% upside to their mean target of £25.54. With a "Strong Buy" consensus and projected earnings growth of 33.1%, Telecom Plus offers both income and growth potential despite some short-term technical weakness.
Drax Group PLC (OTC:DRXGY)
Drax Group secures the second position, trading at £726.50 with notable value credentials. The stock offers a 12.5% fair value upside and a 3.9% dividend yield. What sets Drax apart is its remarkably low price-to-earnings ratio of 4.1x compared to sector peers, alongside analyst projections of 25.8% upside to their £8.39 target price. The company’s 207.1% five-year performance demonstrates successful business transformation. Investors also benefit from double-digit five-year dividend growth and an industry-leading 18.1% shareholder yield.
Severn Trent PLC (LON:SVT)
Severn Trent rounds out the rankings as the premium blue-chip option, currently priced at £2,784.00. The company offers stability with a low beta of 0.37 and a reliable 4.8% dividend yield. However, its premium valuation at 35.7x earnings suggests limited upside, with WarrenAI models indicating a potential 6.3% downside to fair value. Analysts project just 3.4% upside to their £28.93 target. Despite these valuation concerns, Severn Trent’s 26.7% three-year return and strong technical profile may appeal to longer-term investors seeking stability.