Xcel Energy Inc (XEL) is is an electric and gas utility company operating in portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas, and Wisconsin. The company’s operations are composed of 90% electric (serving 3.5M customers) and 10% in the natural gas (serving 2M customers) segment.
Electric utilities in general have seen slower sales industry-wide amid a combination of energy conservation, energy efficiency and shift towards independent power generation/natural gas usage. Coupled with the new regulations from the US government to reduce carbon emissions, electric utilities have started focusing a shift away from dirty fuels such as coal. XEL relies heavily on the electric utility business segment, which makes 90% of the company’s earnings. As we’ve seen with other companies in the sector, this is resulting in falling revenues and competitors have resorted to buying natgas infrastructure assets. XEL needs a similar approach. Earnings are expected to grow at 4.68% over the next five years according to analysts and dividend growth is targeted to be in the range of 5-7% CAGR, although it might fall closer to the lower end of that target range.