Why Xcel Energy Stands Tall among Peers

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Why Xcel Energy Stands Tall among Peers PART 1 OF 11

Xcel Energy’s Diversified Operating Territories

Xcel Energy

When selecting utility stocks, investors typically prefer ones with relatively stable earnings and smoothly growing dividends. Xcel Energy (XEL) has a market capitalization of $23 billion and appears to have potential in both categories.

In fact, among US utilities currently offering attractive yields and dividend growth, Xcel Energy stands out. It’s one of the largest utilities, with almost entirely regulated operations, and is focused on minimizing regulatory lag, which could improve its earnings in the long term.

Xcel Energy’s Diversified Operating Territories

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Xcel Energy is a well-diversified utility, with operations in both electric as well as natural gas domain. Its electric segment accounts for ~85% of its total earnings, while the rest comes from its gas operations. It serves roughly 5.6 million customers.

Xcel Energy has a well-diversified geographical presence. But it has a very large exposure in Colorado and Minnesota. It derives nearly 80% of its earnings from these two states and operates comparatively smaller utilities in other states, which account for 10%–15% of its consolidated earnings.

Xcel has a smaller presence in Michigan, compared with DTE Energy (DTE) and CMS Energy (CMS), which have a noteworthy presence there.

Growth aims

Xcel Energy’s existence in eight states offers customer diversification as well as regulatory diversification. It also helps in balancing earnings, to some extent, in the case of unfavorable weather in some regions.

Xcel Energy aims to grow its earnings per share by 4%–6% annually going forward, which would be in line with the industry average (XLU). It also expects its dividend growth to stay within the range of 5%–7% for the next few years. Xcel Energy’s target dividend growth lies on the higher side of the industry average in dividend growth.

Continue to the next part for a look at how Xcel Energy stock has performed recently.


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