1 Dividend Stock to Consider Now for Nuclear Energy Upside
Nuclear energy stocks have captured the attention of investors recently, particularly as the dynamics within the sector remain fluid. In light of an unfavorable ruling from the Federal Energy Regulatory Commission (FERC) regarding a data center agreement between Talen Energy and Amazon, many major players in the nuclear landscape have faced notable sell-offs. This correction follows significant gains for names like Vistra Energy, Constellation Energy, and Centrus Energy, which soared as hyper-scalers rushed into securing exclusive nuclear power agreements to support their burgeoning data center needs.
However, as investors analyze the ramifications of the FERC decision, it appears that the recent dips in these stocks might serve as opportune entry points. Notably, many leading nuclear energy investments also come with the added benefit of being dividend-paying utility stocks. One stock standing out amidst the turmoil is Entergy Corporation.
Entergy Corporation Outpaces the Market
Entergy Corp. (ETR) is a noteworthy energy utility company with a focus on the generation, transmission, and distribution of electricity. Headquartered in New Orleans, the company operates across several states including Louisiana, Arkansas, Texas, Mississippi, and Missouri, generating electricity from an array of sources including natural gas, coal, oil, nuclear, and hydro. With a market capitalization of $31.29 billion, Entergy has managed to outperform the broader market significantly, witnessing a 47.2% increase in its stock price year-to-date, compared to the S&P 500’s 25.7% gain. Although ETR shares have pulled back about 7% from their recent peaks, this minor correction may present an attractive buying opportunity for dedicated investors.
Entergy also boasts a quarterly dividend of $1.20 per share, translating to a yield of approximately 3.29% at current levels. The company has a commendable track record of paying dividends consistently for 29 years, along with nine consecutive years of dividend increases—a sign of solid financial health and reliable cash flows.
Entergy Reports Mixed Q3 Results
On October 31, Entergy Corp. released its third-quarter earnings, reporting a net income of $644.9 million—or $2.99 per share—which surpassed analysts’ expectations of $2.91 per share. However, the revenue for the quarter came in at $3.39 billion, marking a 5.7% year-over-year decline and falling slightly short of forecasts of $3.46 billion. Operating expenses decreased by 7.7% year-over-year to $2.26 billion, suggesting effective cost management amidst a challenging environment.
At the end of Q3, Entergy maintained a robust cash reserve of $1.41 billion, against a long-term debt of $26.56 billion. CEO Drew Marsh remarked on the company’s performance, stating, “We achieved outstanding results across operational, regulatory, resilience, and growth dimensions…These outcomes are the result of strong execution and leveraging a stakeholder engagement model that starts with the customer and ensures value is created for all stakeholders.”
Revised Guidance and Nuclear Expansion Plans
As part of the earnings call, Entergy management revised their 2024 earnings guidance, now forecasting earnings between $7.15 and $7.35 per share, slightly up from the prior range of $7.05 to $7.35. During the conference, the company also expressed intentions to increase its nuclear capacity, which currently stands at approximately 5KW. Marsh said, “Beyond our sizable existing fleet and capabilities, we are well positioned to evaluate and ultimately pursue new nuclear options.” This includes potential power upgrades totaling 300 megawatts and exploring opportunities for new nuclear projects, including cutting-edge small modular reactor (SMR) technologies.
Valuation and Analyst Recommendations
With 18 analysts covering ETR, the stock enjoys a “Moderate Buy” rating on Wall Street. ETR shares have essentially remained flat recently, alongside an average price target of $149.03, indicating room for growth. Moreover, at a price/earnings-to-growth (PEG) ratio of 2.67—lower than its five-year average—ETR appears to be reasonably valued in the context of long-term nuclear energy upside.
In conclusion, amidst the volatility of the nuclear energy sector, Entergy Corporation emerges as a solid investment consideration for those seeking exposure to both nuclear energy potential and reliable dividend income. As the demand for clean energy continues to expand, particularly in critical sectors like data centers, Entergy is positioning itself to be at the forefront of this transformative shift.
