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D or EXC: Which Is a Better-Positioned Electric Power Stock?

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Key Takeaways

  • Dominion Energy's 2025 EPS and revenues are projected to grow 22.4% and 5.4%, respectively.
  • Dominion Energy's debt-to-capital ratio of 60.03% is lower than Exelon's 63.35%.
  • Dominion Energy offers a 4.37% dividend yield, topping Exelon's 3.56%.

Utility service providers continue to reap benefits from several positive variables, including increased electricity tariffs, accretive acquisitions, cost reductions, and the deployment of energy-efficiency initiatives. The power business also gains from continuing efforts to make electric infrastructure more resilient to adverse weather conditions and the ongoing transition to affordable, renewable energy sources for electricity production.

Utility companies in the United States are taking measures to further strengthen their infrastructure, which includes the generation, transmission, distribution, storage and sale of electricity to customers.

Utilities also require a steady stream of funding for both new asset acquisitions and infrastructure improvements, given their capital-intensive nature. The Federal Reserve recently reduced interest rates by 25 basis points, lowering the benchmark rates to a range of 4-4.25%. Capital-intensive utilities should have improved chances as a result of the rate drop. This is because their margins and profitability will rise due to lower capital servicing expenses.

Utility service providers generally enjoy consistent revenue growth and profitability. Due to their ability to generate cash flows and manage returns, utilities can enhance shareholder value through regular dividend payments. 

Utilities are poised to capitalize on the growing demand from data centers. According to a report by the International Energy Agency, power consumption by data centers is on track to account for nearly half of the growth in electricity demand between now and 2030 in the United States. In advanced economies, data centers are projected to drive more than 20% growth in electricity demand between now and 2030. 

We have run a comparative analysis on two Zacks Utility — Electric Power companies — Dominion Energy (D - Free Report) and Exelon Corporation (EXC - Free Report) — to decide which one is a better pick for your portfolio.

Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dominion Energy has a market capitalization of $51.97 billion, while Exelon has $45.51 billion.

D & EXC’s Growth Projections

The Zacks Consensus Estimate for Dominion Energy’s 2025 earnings is pinned at $3.39 per share on revenues of $15.24 billion. This implies a year-over-year bottom-line increase of 22.4% and a top-line improvement of 5.4%.

The Zacks Consensus Estimate for Exelon’s 2025 earnings is pegged at $2.69 per share on revenues of $24.10 billion. This indicates year-over-year top and bottom-line growth of 4.7% and 7.6%, respectively.

D & EXC’s Debt Position

The debt-to-capital ratio is a crucial indicator of a company's financial position. It shows the amount of debt used to run a business. Currently, Dominion Energy and Exelon have a debt-to-capital of 60.03% and 63.35%, respectively, compared with the industry’s 60.89%.

The times interest earned (TIE) ratio for D is 2.6, and that for EXC is 2.5. Since both companies have a TIE ratio exceeding one, it indicates that they have enough financial flexibility to meet their near-term interest obligations.

D & EXC’s Dividend Yield

Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Dominion Energy is 4.37%, and the same for Exelon is 3.56%. The dividend yields of these companies are better than the Zacks S&P 500 composite’s average of 1.09%.

D & EXC Stocks’ Price Performance

In the past year, D’s shares have risen 4.9% compared with the industry's growth of 8.8%. Shares of EXC have risen 11.8% in the same time frame.

 

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Wrapping Up

Both Dominion Energy and Exelon stocks are well-positioned and, hence, wise investments for your portfolio. They have the potential to improve further from their current position and serve the demands of their growing customer base. However, our choice at this moment is Dominion Energy, given its better growth projections, debt management, and dividend yield compared to Exelon.

 


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