The naming of a new CEO at Xcel Energy (XEL) occurred in the same manner as the rest of the company appears to be run: slow, steady, and predictable. Accordingly, in times of market turbulence a steady stock like XEL can hold significant appeal.
Xcel Energy is primarily a natural gas and electricity utility company serving customers in eight upper Midwest and western mountain states. The bulk of company business is regulated power sales whose rates are negotiated and set by state utility commissions. The typical utility commission approved rates provide the utility company a specified return on equity. The utility company's best financial tactic is to control expenses and, if the company is well managed, profits thus become very predictable.
Xcel Energy has been a model of financial consistency. Earnings per share move up a couple of percent each year and the company has increased the annual dividend by 3 cents per share each year since 2004. With projected earnings per share of $1.70 for 2011, the current $1.04 per year dividend gives a 60 percent payout ratio and a 4 percent-plus yield to investors at recent share prices.
At the end of August, longtime Chairman and CEO Richard C. Kelly retired and was replaced in both positions by Ben Fowke. The quarterly earnings report noted the company had been working on the succession plan for Mr. Kelly for two years. Fowke moves up from his position as president and chief operating officer. Little should change in the management of the company.
Wall Street analysts have a generally positive outlook for XEL. The most recent upgrade came from the analysts at Robert W. Baird & Company, moving the stock to outperform from neutral. The same analysts made the downgrade to neutral in January 2011, so they revised the opinion on the stock relatively quickly. The company next reports on Oct. 27.
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