|Bid||172.96 x 800|
|Ask||173.03 x 800|
|Day's Range||172.82 - 174.23|
|52 Week Range||144.70 - 175.65|
|PE Ratio (TTM)||10.01|
|Earnings Date||Oct 24, 2018 - Oct 29, 2018|
|Forward Dividend & Yield||4.44 (2.54%)|
|1y Target Est||177.25|
NextEra Energy (NEE), the biggest component of the Utilities ETF (XLU), is trading at an EV-to-EBITDA multiple of ~16x—higher than its five-year average valuation. Duke Energy (DUK) is trading at an EV-to-EBITDA multiple of 11.0x. Southern Company (SO) stock is trading at an EV-to-EBITDA multiple of 10.8x—lower than its five-year average.
At large, utilities underperformed broader markets last week. The Utilities Select Sector SPDR ETF (XLU), a representative of the S&P 500 Utilities, rose 0.4%. Broader markets continued to increase and rose more than 1% for the week ending September 14. Despite the Fed’s aggressive stance about the rate hike this year, utilities—one of the most vulnerable sectors to rate hikes—showed strong growth in the last few months due to trade war concerns.
Currently, Southern Company (SO) stock offers an upside potential of ~4.0% from its current level of ~$44.19. Analysts gave Southern Company a median target price of $45.92.
These investors are keeping an eye on the shares of NextEra Energy Partners, First Solar, and Brookfield Renewable Partners. Here's why.
Southern Company (SO) is the highest-yielding stock among the top utilities. Currently, Southern Company is trading at a dividend yield of 5.4%, while the Utilities Select Sector SPDR ETF (XLU) offers a yield of 3.3%. Southern Company increased its dividend per share 3.4% in 2018—compared to 2017.
Southern Company (SO) stock has fallen almost 10% in the last five weeks after management reported a project cost increase at Plant Vogtle. Let’s take a look at Southern Company’s valuation. Southern Company stock is trading at a trailing PE multiple of 21.6x, which is higher than its five-year historical average. In comparison, Duke Energy (DUK) is trading at a PE multiple of 21.5x, while NextEra Energy (NEE) is trading at 14x.
Inc., a federal appeals court said. The U.S. Court of Appeals for the Third Circuit on Thursday barred NextEra from collecting the breakup fee, a decision that boosts recoveries for Elliott Management Corp. and other creditors of Oncor’s former owner, Energy Future Holdings Corp. Bankruptcy courts have discretion under chapter 11 rules to uphold or erase these fees, which can subtract money from a bankruptcy estate and its creditors when paid.
Almost all utility stocks currently offer unattractive upside potentials due to their recent rallies. Among the S&P 500 utilities, PG&E Corporation (PCG) has a relatively handsome upside potential of almost 12% over the next 12 months. Wall Street analysts have given it a median price target of $51.7 compared to its current market price of $46.3.
Among the largest utilities by market cap, NextEra Energy (NEE), the biggest constituent of the Utilities Select Sector SPDR ETF (XLU), has rallied more than 11% so far this year, outperforming utilities on the whole. NextEra Energy’s superior earnings and dividend growth are some of the factors that differentiate it from its peers. To learn how top utility stocks performed this year and how they seem positioned going forward, read How the Big Utilities Are Placed for the Future.
The Utilities Select Sector SPDR ETF (XLU) is currently trading at $54.37, almost 2% and 6% higher than its 50-day and 200-day moving averages of $53.10 and $51.26, respectively. The ETF’s fair premium to both these support levels indicates its strength. These moving averages are expected to act as supports for XLU in the near future.
On the whole, utilities continued their upward march and rose more than 1% in the week that ended on September 7. Broader markets fell almost 1% during the week. Investor jitters and trade war fears have been the main drivers of the rally in utilities over the last few months.
Among the top utilities, Southern Company (SO) stock offers the highest potential upside of more than 5% for the next 12 months. Wall Street analysts have given it a median price target of $45.97 against its current market price of $43.90.
With the market near all-time highs, it's a good time to think about adding some financially strong dividend payers to your portfolio
NextEra Energy (NEE), the most rallied stock among the top utilities, continues to look strong based on its moving averages. It’s currently trading at $170, which is marginally above its 50-day moving average and 6% above its 200-day moving average. Its 200-day moving average of $160.60 could act as a support for the stock going forward. Its RSI (relative strength index) seems stable at 36.
Xcel Energy’s (XEL) EPS has increased at a CAGR (compound annual growth rate) of 6.0% in the last decade or so. It derives almost all its earnings from regulated operations, leading to stable earnings and dividends. Xcel Energy’s management expects its EPS and dividends to grow at similar levels for the next few years, marginally higher than that of utilities (XLU) at large.
Renewables titan NextEra Energy (NEE), the largest constituent of the Utilities Select Sector SPDR ETF (XLU), is currently trading at a PE multiple of ~14x. That’s much lower than its five-year average valuation. It thus appears to be trading at a discounted valuation. NextEra Energy is the top rallied stock among the top utilities so far this year. The second-largest utility by market cap, Duke Energy (DUK), is trading at a PE multiple of 21.0x, which is higher than its historical average.
On September 4, the Utilities Select Sector SPDR ETF (XLU) had an implied volatility of 12%, which is close to its 15-day average. The SPDR S&P 500’s implied volatility was 9%. The implied volatility represents investors’ anxiety. An increase in volatility is generally related to a fall in stock prices. The implied volatility of Southern Company (SO) and Dominion Energy (D) was ~14%. Duke Energy (DUK) and NextEra Energy (NEE) displayed a volatility close to those levels.
Among the utility giants, Southern Company (SO) offers the highest dividend yield of 5.4% against the peer average of 3.3%. The largest of them all, NextEra Energy (NEE), yields 2.6%, the lowest among the S&P 500 Utilities (XLU). Duke Energy (DUK) and Dominion Energy (D) yield 4.6% each.
NextEra Energy Partners (NEP) is set to expand its renewable asset generation capacity in the United States through $1.3-billion acquisition.
Since interest rates in the United States are rising, analyzing utilities’ (XLU) leverages is vital. As of June 30, Southern Company (SO) had a net debt of $47 billion. In comparison, Duke Energy (DUK) and Dominion Energy (D) had net debts of $55.7 billion and $37.6 billion, respectively, at the end of Q2 2018. NextEra Energy (NEE), the largest utility, currently has a net debt of $32 billion, the lowest of the four top utilities.
Utilities at large (XLU) are aiming for an earnings growth of 4%–6% annually for the next few years. In comparison, NextEra Energy (NEE), the fastest-growing top utility, aims to increase its EPS by 6%–8% through 2021. NextEra Energy’s healthy combination of regulated and competitive operations and unmatchable renewables portfolio drove its earnings in the last few years. The planned asset sale of Southern Company’s (SO) assets is expected to make NextEra Energy’s footprint even stronger in Florida.
Two independent renewable energy companies and the subsidiary of a major U.S. power utility are set to reward dividend investors for potentially decades to come.