An Insider Bought Shares of Xcel Energy

The stock pays a dividend yield close to 4%, based on recent dividend payments and the current stock price. Xcel does have a history of gradually increasing its dividend over the last ten years, and so we approve of the stock’s income prospects- as well as its defensive nature, given the beta of 0.2. Analyst estimates imply a forward P/E multiple of 14; that is not particularly interesting for a stable company from a value perspective but is low enough that income investors would be unlikely to see a sharp decline in the stock price.

We would compare Xcel to other utilities including Duke Energy Corp (NYSE:DUK), The Southern Company (NYSE:SO), American Electric Power Company, Inc. (NYSE:AEP), and CenterPoint Energy, Inc. (NYSE:CNP). As utilities these companies also have little exposure to the broader economy and therefore betas of less than 0.5. These peers also pay dividend yields of 4% or slightly higher, and so they might be even better choices for income or defensive investors than Xcel. Duke and Southern in particular are well capitalized with market caps close to $40 or $50 billion, and might be particularly good places to start looking for utility stocks. We would note, however, that in terms of earnings Xcel is generally priced at a small discount to these other companies.

There doesn’t seem to be a particular reason to imitate this insider purchase. In terms of value Xcel is not especially appealing, and while it is characterized by a high yield and a low beta the same is the case for other utilities, some of which edge the company on both grounds. While we would take note of the insider purchase the bullish case for Xcel seems to come from an income or defensive perspective and we think that some peers might be stronger options.

Disclosure: I own no shares of any stocks mentioned in this article.