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Comparing Exelon’s Yield and Dividends with Hybrid Utilities

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Exelon’s forward dividend yield

Exelon (EXC) is currently trading at a forward dividend yield of 3.6%, with an expected dividend growth rate of slightly under 2% for the next two years. A company’s forward dividend yield is calculated by dividing its estimated one-year future dividend per share by its current market price per share. Let’s see how peers are placed when it comes to dividend growth and forward yields.

The above graph shows the comparison of utilities in terms of forward yields and expected dividend growth.

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Dividend growth

NextEra Energy (NEE) is likely to beat its peers with its robust expected dividend growth in the next two years. Its dividends are forecast to increase by 13%. Public Service Enterprise’s (PEG) dividend growth rate for the next two years is near 5%.

Analysts are estimating utilities earnings to increase by an average of 4%–6% in the next few years. The same growth could also be mirrored in dividends.

The forward yield of NextEra Energy stands at 3%, which is lower than other unregulated players. FirstEnergy’s (FE) forward yield is 4%. Utilities with volatile earnings tend to have higher yields. Investors generally expect higher yields to compensate for higher risks.

Many mid-sized utilities are currently trading in the same forward yield range as Exelon. Regulated utilities have stable earnings, so they’re expected to pay more stable dividends than unregulated utilities.

Let’s have a look next at Exelon’s valuation. Is it undervalued or fairly valued compared to its peers?

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