Xcel Energy (XEL) is part of the S&P 500 Utilities Index (XLU). So far in 2017, it has been one of the highest-rising stocks in XLU. Xcel Energy stock had risen ~25% this year before its recent correction. During the same period, the Utilities Select Sector SPDR ETF (XLE) rose 15%. The latest weakness in Xcel Energy stock might offer an attractive opportunity for new entrants. The stock offers stability, which might be crucial going forward in the uncertain broader market environment.
Investors took shelter in relatively safer utility stocks during the market turmoil this year. Xcel Energy is one of the relatively safer utility stocks (VPU) mostly due to its earnings stability. At $24 billion of market capitalization, it’s a diversified utility holding company with almost entirely regulated operations. Large exposure to regulated operations facilitates earnings stability and predictability. Stable earnings ultimately enable stable dividends.
Xcel Energy is trading at a dividend yield of 3.2%—lower than the industry average. However, Xcel Energy’s yield is notably higher than broader markets and ten-year Treasury yields.
Xcel Energy’s total returns flourished in the last few years due to a healthy contribution from dividends and stock appreciation. It has substantially outperformed peer utilities in the last three-year and five-year period. Including dividends, Xcel Energy returned 15% compounded annually in the last five years. XLU returned 12% compounded annually during the same period.
Xcel Energy stock might continue to attract investors with its relatively smarter earnings and dividend growth.
In the next part, we’ll discuss where Xcel Energy stock could go in the near future.