Where Xcel Energy Stock Stands among Peers Now
Minneapolis-based Xcel Energy (XEL), a $22-billion utility, continues to be an attractive name among peers. XEL stock has also been rallying significantly over the past few months, and its handsome dividends have contributed to solid total returns.
Xcel Energy, which is currently trading at a relatively lower dividend yield of 3.2%, stands out among peers, given its stable earnings and stable dividend growth.
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Xcel Energy’s more or less entirely regulated operations have led to comparatively stable earnings, and its management appears to be working on several fronts to keep earnings growth steady in the future. One of the strategies that it is employing includes multiyear rate plans. The company files multiyear rate cases for rate recovery, which tend to reduce regulatory lag.
Xcel Energy stock has rallied nearly 10% so far this year, while the Utilities Select Sector SPDR ETF (XLU) has managed to soar 6% during the same period. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) has gained 5% over the same period. Xcel makes up more than 3.5% of XLU. Notably, the utility sector makes up nearly 3.2% of SPY.
The above chart compares the performance of Xcel Energy, XLU, and SPY over the past year.
Xcel Energy’s earnings
Xcel Energy aims to grow its earnings per share by 4%–6% going forward. This earnings growth will likely come from investments in its regulated rate base, and its capital spending plan of $18 billion is expected to grow the company’s regulated rate base by 5.5%, compounded annually, for the next five years.
Remember, earnings stability is of utmost importance for utility investors because it generally drives utilities’ dividend payments. Continue to the next part of this series for a look at a few key indicators.