Utilities are very boring businesses. However, they tend to generate steady returns. Because of that, they can be great investments to slowly grow your wealth.

The simplest way to invest in utility stocks is through the Vanguard Utilities ETF (VPU 0.53%). The exchange-traded fund (ETF) has generated an average annualized return of 9.6% since its inception 20 years ago. At that rate, it can grow a monthly investment of $250 into $773,921 in about 35 years.

The returns produced by utilities could be even higher in the future, given the expected acceleration in electricity demand. That could enable an investor to make even more money from these low-risk stocks in the coming years.

Low-risk investments

The Vanguard Utilities ETF aims to track the investment returns of the utilities sector. These companies provide basic services like generating electricity and distributing power, natural gas, and water to customers. Utilities tend to generate very stable earnings due to steady demand for these services. Meanwhile, government entities regulate rates, which are stable and slowly rising.

Utilities use their stable cash flows to pay dividends to their shareholders and invest in maintaining and expanding their operations. Regulators approve those investments, enabling utilities to earn predictable returns. Because of that, they typically deliver slow and steady earnings growth.

The Vanguard Utilities ETF currently holds 69 utility stocks. Its top five holdings are:

1. NextEra Energy (NEE -1.85%): 10.9% of its holdings
2. Southern Company: 7.4%
3. Duke Energy: 6.8%
4. Constellation Energy (CEG 0.96%): 5.9%
5. American Electric Power: 4.3%

These utility stocks currently pay above-average dividends. This means the fund has a dividend yield of 2.9%, which is more than double the average dividend stock as measured by the S&P 500's (^GSPC 0.64%) dividend yield (1.3%). That dividend income provides investors with a solid base return that grows each year as the fund's utility holdings increase their dividend payments:

VPU Dividend data by YCharts

The coming power acceleration

Utility stocks have generated solid total returns over the past 20 years, even though the country's electricity demand has grown at a snail's pace. U.S. power demand has only increased by 9% over the past two decades.

However, utilities have increased their earnings by around 4% per year by investing in cleaner energy. They've been steadily replacing coal-fired power plants with cheaper and cleaner natural gas-fired generating capacity and renewable energy. When combined with rising dividends, that slow and steady earnings growth has enabled utilities to produce total annual returns approaching 10% during that period.

Utilities appear poised to grow much faster in the future. Forecasters expect U.S. power demand to surge in the coming decades, with IHS projecting that it will expand 55% by 2040, a roughly sixfold increase in the growth rate. Powering this surge are catalysts like artificial intelligence (AI) data centers, the electrification of everything, onshoring of manufacturing, electric vehicles, and other factors. Because of that, utility stocks should deliver much higher total returns in the future.

This outlook has many utilities expecting robust growth in coming years. For example, leading U.S. utility NextEra Energy anticipates growing its adjusted earnings per share at or near the top end of its 6% to 8% annual target range through at least 2027. That should support dividend growth of around 10% annually through at least next year. The renewable energy-focused utility could continue growing at a strong rate for many years to come, given the growing need for clean power.

Constellation Energy expects to grow even faster. The nation's leading nuclear power producer anticipates delivering 10%-plus annual earnings-per-share growth through at least 2028. That robust rate doesn't include its deal with Microsoft to restart its Three Mile Island Unit 1 reactor in 2028 to support the technology giant's growing need for clean power. It also doesn't include its highly accretive $26.6 billion acquisition of Calpine Energy, which could close next year and further accelerate its growth rate.

A potentially enriching ETF

Utilities have been slow and steady wealth-creating investments over the years. Their returns could be even better than their historical average in the future, given the coming power surge in the U.S. Because of that, the Vanguard Utilities ETF should be a great, low-risk way to grow your wealth in the upcoming decades.