Utilities – once a sleepy corner of the stock market – have been surging over the past year, but the sector’s success may complicate the search for cheap dividend-paying names. The Utilities Select Sector SPDR Fund (XLU) is up 26% over the past 12 months, lifted by excitement around the companies’ role powering the boom in artificial intelligence boom and data centers. Heavy hitters Vistra Corp and Constellation Energy have soared more than 320% and 150%, respectively, over the past year. XLU 1Y mountain The Utilities Select Sector SPDR Fund (XLU) over the past year But those sharp spikes in appreciation have raised questions among investors about whether they’ll have to adjust their search parameters as they hunt for dividend payers among utilities. “The approach now in utilities is that you have to be a little more selective,” said Brent Coggins, chief investment officer at Triad Wealth Partners in Lawrence, Kansas. “This AI influence has shifted focus more in terms of picking dividend-paying utility companies to almost growth-style utility selection.” A rethink post DeepSeek Even with the run-up in large-cap utilities, Coggins thinks valuations have yet to become overstretched. When it comes to picking names, investors will need to be selective and go for companies that are nimble and ready to meet growing power demand. “Now, you look at things like, which providers are in a better market from a climate change perspective, which ones can bring on nuclear faster,” he said. “Providers like that will have a major advantage.” This also means being ready to scoop up stocks when their prices take a hit. Consider that this week, tech names tied to the AI trade – as well as the utilities expected to supply the power – took a hit. The emergence of Chinese AI startup DeepSeek raised concerns over the amount of money tech companies were investing toward their AI efforts, dragging chip giant Nvidia down 14% week to date. “We still see merits in the integrated utilities over transmission & distribution but continue to recommend select lower risk names with more balanced risk rewards,” wrote Jefferies analyst Julien Dumoulin-Smith in a Tuesday note. Names that fit this narrative include Exelon , PPL Corp and Evergy , he said. Those stocks also happen to be dividend payers. Exelon has as dividend yield of 3.8%, and shares are up 14% in the past 12 months. PPL’s shares are up 28% in the past year, and they offer a dividend yield of 3.1%. Evergy’s dividend yield is 4.2%, and shares are up nearly 27% in the past 12 months. PPL 1Y mountain PPL Corp in the past year Further, with earnings coming up for these names and the DeepSeek sell-off still fresh, investors will want more details on what’s next for data center deals at the utilities, Dumoulin-Smith added. “How companies are updating and refreshing the data center pipeline versus containing stale data will provide insights into the confidence across the board,” he said. Playing on the data center power theme, JPMorgan also called out midstream companies that work with natural gas. Analyst Jeremy Tonet noted in a Tuesday report that Williams , Kinder Morgan and DT Midstream were among the names to sell off sharply in Monday’s DeepSeek scare. But that speed bump doesn’t hurt the long-term case for natural gas power names. “We do not see sufficient evidence that the case for meaningful natural gas demand growth has been derailed long term, certainly not cutting the data center demand growth case in half as others have postulated,” he said. Tonet highlighted TC Energy as “the best intersection of molecules and electrons.” The stock offers a dividend yield of about 5%, and shares are up nearly 13% in the past 12 months. Searching for smaller names Others recommend digging for smaller companies to unearth gems. Morningstar energy and utilities strategist Travis Miller recently highlighted the midcap space as offering a host of attractive opportunities. “The sweet spot right now? It’s the midcap space. There’s less execution and financing risk and more earnings growth upside,” he said. The valuation of midcap utilities doesn’t reflect the potential upside they may see just from locking up one or two deals, the strategist said. In this space, Miller likes NiSource , WEC Energy and Evergy. NiSource is up 44% in the past 12 months and has a dividend yield of 3%. WEC Energy is up 23% in the past year, with a dividend yield of 3.6%. “The best picks are going to be utilities that can execute, that can reduce their execution risk as data center growth becomes a bigger trend,” he added.