Utility stocks have underperformed the broad market this year. The Utilities Select Sector SPDR, a basket of more than 30 electric and gas producers, traders and distributors, is up about 10%. The SPDR S&P 500 ETF, which tracks large American companies in all industries, has gained 24%. But there are at least three reasons to believe utilities are now a better deal than a broad-market mutual fund.

First, they re comparatively cheap. Utility shares within the S&P 500 index trade at less than 12 times 2009 earnings vs. 20 times earnings for the overall index. Second, they pay better. The aforementioned utility fund carries a 4% dividend yield, which is about double that of the broad-market S&P 500. Third, unlike many stocks, utilities don t seem set up for earnings disappointment next year. Analysts forecast (and investors expect) 35% earnings growth for the broad market next year. For utilities, the projection is just 10%. And whatever the economic sensitivity of utility earnings some power companies sell less electricity to industrial customers during recessions, and some face pricing pressure when the cost of a fuel source used by rivals falls profits of companies that sell less-needed goods than heat and light are surely at greater risk.

Besides, investors shouldn t read this year s unimpressive stock gains for utilities as underperformance. When the stock market tanked starting in October 2007, utilities fell by less than the broader market, and so they've had less far to climb back. Since the market s October 2007 high, utilities have outperformed even without their generous dividends.

Below are three promising utilities paying more than 5%.

Southern Company

Yield: 5.1%

Atlanta-based Southern Company owns regulated electric utilities serving customers in Alabama, Florida, Georgia and Mississippi. Its shares have given investors a relatively smooth ride over the past two years in part because Southern uses long-term contracts to offset volatility in power and fuel prices. Strong population growth in the South bodes well for the company, but its heavy reliance on coal puts its earnings at increased risk of carbon-capping legislation. Analysts expect the company to invest more than $20 billion by 2012 in projects and acquisitions with an emphasis on nuclear and gas power.

Consolidated Edison

Yield: 5.2%

Based in Manhattan, Consolidated Edison provides electricity and gas to New York City and some of its posh bedroom communities to the north and operates the world s largest commercial steam system serving Manhattan since 1882. (Read all about how and why big cities use steam here Even by electric company standards, ConEd is boring with little of its revenue coming from power generation or competitive businesses. But the stock s lack of excitement is one of its chief attractions. Investors can reinvest dividends into modestly priced shares over a lifetime.

Progress Energy

Yield: 5.9%

Raleigh, N.C.-based Progress Energy is the product of a November 2000 merger between Carolina Power & Light and Florida Progress Corporation. Its profits are expected to grow by a barely perceptible 2% this year and 4% next year. A possible rate boost in Florida next year might help. The regulatory ruling is expected in late January. But really, Progress stockholders are invested more for the fat quarterly payments than earnings and share price increases.