1 Dividend Stock to Consider Now for Nuclear Energy Upside

Nuclear energy stocks have gained significant attention lately, particularly following an unfavorable ruling from the Federal Energy Regulatory Commission (FERC) that impacted a data center deal between Talen Energy and Amazon. This setback came on the heels of rising valuations and interest in major players in the nuclear energy sector, including Vistra Energy, Constellation Energy, and Centrus Energy. With hyper-scalers looking to secure exclusive nuclear power deals to support their data center ambitions, investor sentiment is critical. However, the recent FERC decision may present buying opportunities, especially as many leading nuclear energy properties also offer attractive dividends. Among these, Entergy Corporation (ETR) stands out as a solid investable option.

Entergy Corporation Outpaces the Market

Entergy Corp. (ETR) is a prominent energy utility company headquartered in New Orleans, with a market capitalization of approximately $31.29 billion. The company focuses on the generation, transmission, and distribution of electricity, encompassing energy sources such as nuclear, natural gas, coal, oil, and hydroelectric power. Entergy distributes power across five states: Louisiana, Arkansas, Texas, Mississippi, and New Mexico.

In 2024, Entergy’s stock has outperformed the broader market, showcasing an impressive gain of 47.2% compared to the 25.7% gain seen in the S&P 500 Index. Although shares are currently down about 7% from their recent highs, the long-term outlook remains positive. The company offers a quarterly dividend of $1.20 per share, yielding about 3.29% at current levels. Remarkably, Entergy has consistently paid dividends for the past 29 years, with an uninterrupted increase in dividends for the last nine years.

Entergy Reports Mixed Q3 Results

On October 31, Entergy Corporation reported its third-quarter results, highlighting earnings of $644.9 million or $2.99 per share, which surpassed analysts’ expectations of $2.91 per share. Despite this, the company faced a slight dip in revenue, totaling $3.39 billion, which fell 5.7% year-over-year and was slightly below forecasts of $3.46 billion. Operating expenses for Q3 were recorded at $2.26 billion, down 7.7% compared to last year.

As of Q3, Entergy held a cash reserve of $1.41 billion and had long-term debt amounting to $26.56 billion. CEO Drew Marsh stated, “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.”

Furthermore, Entergy updated their 2024 earnings guidance, now projecting earnings between $7.15 and $7.35 per share, up from a prior estimate of $7.05 to $7.35 per share.

Is ETR Stock a Good Buy for Nuclear Energy Upside?

During the conference call post-earnings announcement, Entergy’s management elaborated on their intentions to broaden their nuclear capacity, which currently stands at approximately 5,000 megawatts. CEO Marsh remarked, “Beyond our sizable existing fleet and capabilities, we are well positioned to evaluate and ultimately pursue new nuclear options.” He further mentioned active explorations for capacity upgrades at existing facilities that could yield up to 300 megawatts in additional power, along with potential projects involving new nuclear reactors and small modular reactor (SMR) technologies.

With coverage from 18 analysts, ETR is rated a “Moderate Buy” on Wall Street, though shares closed nearly flat recently with a target price averaging $149.03. It’s worth noting that Entergy’s price/earnings-to-growth (PEG) ratio is currently at 2.67, which is lower than both its five-year average and the sector median. This suggests that ETR remains a reasonably valued investment in the context of long-term nuclear energy growth opportunities.

Conclusion

As the nuclear energy sector faces short-term fluctuations, particularly influenced by regulatory decisions, investors may find stocks such as Entergy Corporation appealing due to their strong market performance, consistent dividends, and plans for expansion. Given the company’s solid earnings report and favorable guidance, Entergy’s stock could well be a wise addition to diversify portfolios amid the growing interests in clean energy solutions.