Is Eversource Energy Dividend Worth It?

Eversource Energy (NYSE:ES) is a utility holding company paying a really generous dividend of 4.24% and has had a good run over the past six month, rising by 14%.

The energy services company makes money from a wide range of avenues, including Electric Distribution, Electric Transmission, Natural Gas Distribution, and Water Distribution and services over 4.4 million customers.

So is it worth buying right now or will the share price plateau and start to turn downward?

Eversouce is Investing Non-Stop

Eversource hasn’t shied away from investing in its wide range of businesses to deliver value to shareholders. Last year, it invested over $4.6 billion in its core businesses to make its systems more resistant to weather and allow more clean energy sources to link with the grid.

As part of the investment efforts, Eversource made a significant move to improve the reliability of electric systems in New Hampshire. It filed a formal request with the New Hampshire Public Utilities Commission to update distribution rates through a comprehensive rate review process. That can be interpreted to mean, higher rates and higher revenues.

In the first half of the year, Eversource wrapped up Phase I for the Cape Cod Solution, a multi-phase transmission plan to enlarge the company’s West Barnstable substation and build a 12.5-mile transmission line to aid in clean energy distribution.

During that same period, Eversource and National Grid announced they had finished the Woburn to Wakefield Transmission Line Project designed to strengthen the electric grid in that area, allowing it to better handle bad weather and provide users with more reliable service.

The project involved upgrading Eversource’s Woburn substation and National Grid’s Wakefield Junction substation and build a fresh 8.5-mile 345 kV underground transmission line, both of which are important for maintaining a solid and dependable electrical infrastructure.

In March, Eversource reached a milestone related to Connecticut’s clean energy objectives as it finished the Eastern Connecticut Reliability Program, which cost $190 million. 

Put all these into the mix and you end up with a company that is by no means resting on its laurels in its ambitions to grow shareholder value. So how do the number look?

How Are Eversource’s Financials?

Skip back a few years and Eversource had been posting stunning revenue growth. In every single quarter without exception from 2020 to 2023, management reported year-over-year rises. Then came 2024 and the positive trend did a sharp U-turn with every single quarter sliding backwards.

Remarkably, in spite of the slowdown in revenues, earnings before interest and taxes were up in fiscal 2024 versus the year prior.

In the most recent quarter, Eversource’s operating revenues were $2.53 billion, a 3.5% decline from the same period last year, while operating income rose 7.5% year over year to $602.50 million.

Net income and earnings per common share stood at $337.22 million and $0.95, respectively, considerably higher than $17.30 million and $0.04 in the same period last year.

As of Q2 2024, total current assets climbed to $4.67 billion, up from $4.25 billion as of December 31, 2023 and total assets stood at $58.35 billion, compared to $55.61 billion as of December 31, 2023.

Top line aside, the financials generally look pretty good, so is the dividend sufficiently compelling to make the stock worth buying?

Is Eversource Energy Dividend Worth It?

Eversouce Energy’s dividend of 4.24% may not be worth it because the company has a negative payout ratio and is tapping into balance sheet reserves to keep shareholders appeased.

That’s a warning sign for investors that the balance sheet may be more fragile than they assume. And indeed a deeper dive into reveals that Eversource Energy operates with a significant debt burden that most recently sat at $26.1 billion against just $33 million in cash.

The dividend appears to be in very serious jeopardy right now and that should concern investors who are buying it purely as an income play. It also poses risk to the share price.

Unless net income increases sharply, which admittedly it is forecast to grow this year, shareholders may be out of luck.

Eversource Energy Key Stats

Eversource’s revenue has increased at a CAGR of 6% in the last three years while EBITDA and total assets have also grown at CAGRs of 8.4% and 7.3%, respectively. In addition, its tangible book value rose at a CAGR of 1.4% during this same time frame.

For the fiscal year ending in December 2024, analysts forecast that Eversource’s revenue will be $13.06 billion, up 9.6% year-over-year. EPS is expected to hit $4.56 per share, an increase of around 5% compared to last year’s numbers.

For the next fiscal year, revenue is expected to rise by 2.4% and land at around $13.37 billion. Analysts predict EPS may increase by 5.5% from last year to $4.81.

Forward non-GAAP P/E, Eversource is trading at 14.72x, which is slightly below the industry average of 17.38x.

Forward EV/Sales ratio is 4.06x, below the industry average of around 4.14x while the forward price/sales ratio stands at 1.84x, also lower than the sector average of 2.22x.

The forward Price/Book ratio amounts to 1.53x compared with an industry mean of 1.72x, a difference reflected in its being lower by around 10.9%. Eversource’s forward Price/Cash Flow sits at approximately 6.24x compared with the sector average of 7.93x.

Analysts have set a target price of $71.04 for Eversource, up 5.85% from the current price.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.