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4 Reasons to Add Xcel Energy (XEL) to Portfolio Right Now

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Xcel Energy Inc.’s (XEL - Free Report) ongoing investments in infrastructure projects, a focus on renewable expansion, strengthening the rate base and a consistent increase in the customer base will continue to boost the financial performance.

Let’s focus on the factors, which make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment.

Growth Projection & Surprise History

The Zacks Consensus Estimate for 2022 earnings has moved up by 0.3% in the past 60 days to $3.18 per share.

The Zacks Consensus Estimate for 2023 earnings has moved up by 0.3% in the past 60 days to $3.40 per share.

Xcel Energy delivered an average earnings surprise of 2.1% in the last four quarters.

Xcel Energy’s long-term (three to five years) earnings growth is projected at 6.4%.

Dividend

Xcel Energy has a long history of dividend payments and has paid dividends to shareholders consecutively since 2000. XEL aims at increasing the dividend rate annually in the range of 5-7%, subject to the approval of the Board of Directors. It has raised dividends annually for 18 consecutive years. The new dividend for 2022 is $1.95 per share, which represents a 6.6% increase from 2021.

Currently, Xcel Energy has a dividend yield of 2.7% compared with the Zacks S&P 500 composite's average of 1.4%.

Stable Investments & Emissions Reduction

Xcel Energy continues to invest substantially in utility assets to provide reliable services to customers and effectively meet the rising electricity demand. Xcel Energy aims at spending $26 billion in the 2022-2026 period, which includes the $1.5-$2.5 billion range of incremental opportunities. These investments are aimed at strengthening and expanding transmission, distribution, electric generation and renewable projects.

The addition of new clean energy projects in the generation portfolio will assist XEL to achieve the net-zero emission target set for 2050. Xcel Energy, to achieve this target, will completely exit coal-based generation by 2034 and has plans to cut greenhouse emissions from the natural gas business by 25% by 2030.

Customer Addition

With the economy gradually opening up after the pandemic, Xcel Energy continues to expand the customer base. After recording an improvement of 1% and 1.2% in the electric and natural gas customer base year over year for 2020, the same increased 1.2% and 1.1%, respectively, in 2021.

Electric and natural gas sales volumes for 2021 improved 1.7% and 0.4%, respectively, year over year.

Return on Equity

Return on Equity (ROE) indicates how efficiently a company is utilizing shareholders’ funds in the business to generate returns. At present, XEL’s ROE is 10.6%, higher than the industry average of 9.2%, which indicates that the company is utilizing the funds more effectively than industry peers.

Price Performance

In the past three months, Xcel Energy has rallied 6.2% compared with the industry’s 0.9% growth.

Zacks Investment Research
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Other Stocks to Consider

Other similar-ranked stocks from the same industry include Entergy Corp. (ETR - Free Report) , NiSource Inc. (NI - Free Report) and WEC Energy Group Inc. (WEC - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth of Entergy, NiSource and WEC Energy is projected at 1%, 7.2% and 6%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of Entergy, NiSource and WEC Energy has moved up 5.2%, 5.1% and 4.6%, respectively, year over year.

In the past three months, ETR, NI and WEC’s shares have surged 6.4%, 18.1% and 2.3%, respectively.