Income hunters around the world are facing a near-unprecedented challenge from Covid-19, with many of the traditional stalwarts of income in the energy, banking and consumer goods industries facing a scenario of tumbling revenues for an extended period. 
As a result, many of them are being forced to cut or scrap dividends to shore up balance sheets, with the uncertainty over when businesses can get back to normal looming over many industries.
These are testing times and many income investors will now be heading to ‘defensive’ stocks which have traditionally been able to continue to function as normal because of ongoing demand.
One area which looks particularly resilient now is utilities. Around the world, regulated companies are providing investors with an opportunity to secure incomes from regulated sectors which deliver essential services, such as power and water.
So which alternative income stocks in these sectors offer investors the best opportunities? Below are five names paying yields of 4 per cent or more which should be on income seekers’ radars.
NextEra Energy – forward dividend yield of 5.35 per cent
A leading clean energy company in the renewables sector with revenues of $17.5bn currently, it has a pipeline of wind and solar assets to develop over the coming years.
While it sold off alongside the wider market in the recent downturn, the company has rebounded strongly but still represents an attractive opportunity for investors, trading well below recent peaks.
Crucially for income investors, it generates attractive levels of cashflow and dividends which grow in line with inflation.
Transurban Group - forward dividend yield of 4 per cent
Australian-listed toll road operator Transurban Group has seen parts of its business come under pressure from the lockdown, with use of its roads down as traffic reduces.
The share price has dipped recently as a result, but from here that represents an attractive entry point for investors, with a likely tailwind to come from the relaxing of the lockdown which will see traffic increase back up to previous levels over time.
Covid is also likely to prompt more people to drive than take public transport for some time to come, and these trends are simply not reflected in the current share price after it sold off during March and April.
United Utilities – forward dividend yield of 4.8 per cent
A name familiar to UK investors, United Utilities has had a volatile few years, firstly because of concerns about Brexit and then about the risk of nationalisation.
The Conservative party victory in the UK general election removed that threat and the stock rallied sharply into 2020, but it retreated with the market during the pandemic.
However, the guidance from the company is positive, with the business not predicting any significant impact from Covid thanks to the fact that it is heavily regulated.
With a near 5 per cent yield it therefore represents an attractive opportunity for investors, especially as the sell-off for its shares on Covid concerns seems overdone.
SNAM – forward dividend yield of 6.3 per cent
An unknown name to most UK-based investors, SNAM is an Italian-listed natural gas distributor with operations across Europe.
Regulated, safe and very defensive, with lots of liquidity in its shares and only a very minor risk of seeing its capital expenditure for future projects falling, it is another clear energy company which will is playing a vital role in changing the world’s energy mix away from the dirtier fuels.
Italy is in the headlines at the moment over its debt levels, and its stock market is down more than a quarter since the crisis started. SNAM has fallen far less, down around 10 per cent year-to-date, but given nothing has happened to its business model, this ultra-defensive utility looks very appealing at current valuations.
Red Electrica – forward dividend yield of 6.4 per cent
Another European name, Red Electrica is a highly regulated electrical utility company which is at the heart of Spain’s drive to meet EU renewable energy targets.
The national power grid operator in Spain, it has already said it has €3.2bn of capex to spend going forward to help the country achieve rollout cleaner electric power generation.
Crucially because of the pandemic, it is now trading below the value of its assets but given the regulatory certainty it has – and which so many other income stocks simply don’t – we think it looks very undervalued, especially with such a high dividend yield.
Shane Hurst is senior investment analyst and portfolio manager of the Legg Mason IF RARE Global Infrastructure Income fund. The views expressed above are his own and should not be taken as investment advice.