Updated 3/6/25
Avista Corporation (NYSE: AVA) is a name many income-focused investors might recognize. As a regulated utility serving the Pacific Northwest, Avista operates in a sector known for stability, steady cash flows, and reliable dividends. That consistency is what has drawn long-term investors to the stock for years.
But while the company has a solid dividend track record, it’s not without challenges. High debt levels, recent earnings pressure, and regulatory risks are factors worth considering before jumping in. Let’s take a deep dive into Avista’s dividend strength, financial health, and valuation to see whether it’s a good fit for dividend investors right now.
Key Dividend Metrics
💰 Dividend Yield: 4.96%
📅 Most Recent Dividend Payment: March 14, 2025
📈 Dividend Growth Streak: 22 years
🔄 5-Year Dividend Growth Rate: ~4%
⚠ Payout Ratio: 82.97% (on the higher side)
📉 Stock Price (Last Close): $39.49
Avista’s nearly 5% dividend yield is one of its biggest selling points. That’s well above the broader market average and even slightly higher than its own five-year average of 4.47%. The company has also increased its dividend for over two decades, making it a relatively dependable income source.
Dividend Overview
For income-focused investors, Avista’s track record is a definite plus. Few companies can claim a 22-year streak of dividend increases, especially in a capital-intensive industry like utilities. However, dividend growth has been on the slower side, averaging about 4% annually over the last five years.
A payout ratio of nearly 83% raises some questions about sustainability. While utilities can typically afford higher payout ratios thanks to their regulated revenue streams, this doesn’t leave much wiggle room. If earnings remain under pressure or if free cash flow continues to struggle, dividend growth could slow, or in a worst-case scenario, the payout could become unsustainable.
Dividend Growth and Safety
The most important factors determining Avista’s dividend stability are its earnings, free cash flow, and ability to manage debt. Right now, there are some concerns on these fronts.
- Earnings per share (EPS) sits at $2.29, which is barely covering the current annual dividend of $1.96 per share.
- Quarterly earnings growth has declined 20% year-over-year, which isn’t a great sign for long-term dividend security.
- Free cash flow is negative (-$143 million), meaning the company is relying on debt to fund parts of its business.
On the positive side, utilities typically have a level of earnings predictability due to regulatory oversight. That said, Avista needs to stabilize earnings and cash flow to ensure continued dividend growth without stretching its balance sheet further.
Chart Analysis
Avista Corporation (AVA) has made a strong upward move in recent sessions, breaking above both its 50-day and 200-day simple moving averages (SMA). This signals a potential shift in momentum, especially as the shorter-term 50-day SMA is curling upward after previously trending sideways. A sustained move above these moving averages often indicates renewed buying interest and could serve as a support level if the stock pulls back.
Looking at recent price action, AVA has surged to $39.49, nearing its 52-week high. The last five candles show significant bullish momentum, with the most recent candlestick forming a long wick to the upside. This suggests some profit-taking at these elevated levels, which is natural after a sharp move higher. If selling pressure continues, we may see a retest of the moving averages around $37.50–$38.00.
Volume has also picked up considerably, confirming the strength of this recent breakout. A surge in volume accompanying price movement often indicates conviction behind the move, rather than a false breakout. However, if volume starts to dry up, it could suggest that the rally is losing steam.
The Relative Strength Index (RSI) is hovering around 46.55, meaning the stock isn’t yet in overbought territory. This leaves room for further upside before hitting extreme levels, though it’s worth watching for signs of exhaustion if the RSI moves above 70.
Overall, the price action suggests AVA is at a critical point. The stock has made a strong push higher, but now faces some resistance as it approaches a key level. Whether it can hold above its moving averages and continue its uptrend will likely depend on broader market conditions and investor sentiment.
Analyst Ratings
Avista Corporation (AVA) has recently experienced a mix of analyst opinions, reflecting both positive and cautious sentiments.
Upgrades
🟢 May 3, 2024: Mizuho upgraded AVA from ‘Underperform’ to ‘Neutral,’ adjusting the price target from $32 to $36. This change was attributed to a more favorable outlook on the company’s operational performance and financial stability.
🟢 January 22, 2024: Guggenheim shifted its rating from ‘Sell’ to ‘Neutral,’ setting a price target of $34. The upgrade was based on improved regulatory environments and better-than-expected earnings reports.
Downgrades
🔴 September 12, 2024: Bank of America initiated coverage with an ‘Underperform’ rating and a price target of $37, citing concerns over the company’s high debt levels and potential regulatory challenges.
🔴 February 9, 2023: Mizuho downgraded AVA from ‘Neutral’ to ‘Underperform,’ reducing the price target from $45 to $38. The decision was influenced by anticipated earnings pressure and limited growth prospects.
Consensus Price Target
📉 As of the latest analyses, the consensus 12-month price target for AVA stands at approximately $37.33, suggesting a potential downside from current trading levels.
Earnings Report Summary
Avista Corporation recently shared its latest financial results, giving investors a look at how the company performed over the past year. The numbers show a steady business with some positive developments, but also a few challenges that are worth keeping an eye on.
Financial Performance
The company reported earnings per share of $2.29 for the year, slightly higher than last year’s $2.24. Net income also saw a modest increase, reaching $180 million compared to $171 million in the previous year. While the growth isn’t dramatic, it reflects the steady nature of Avista’s business as a regulated utility.
Business Segments
Avista Utilities, which covers its core electric and natural gas operations, contributed $179 million in net income, up from $167 million last year. This segment remains the backbone of the company. Meanwhile, Alaska Electric Light and Power (AEL&P), a smaller part of Avista’s business, brought in $8 million in net income, slightly lower than the $9 million it generated in the prior year.
Operating Trends
One of the bright spots in the report was the increase in Avista’s electric utility margin, thanks to favorable regulatory rulings that allowed the company to adjust rates. The natural gas utility margin also improved, driven by similar rate adjustments. However, the company did see higher operating expenses due to increased costs related to maintenance, legal matters, and medical expenses. These rising costs are something to watch, as they can impact future profitability.
Capital Investments
Avista continues to invest heavily in its infrastructure, with about $510 million spent on capital projects in 2024. These investments are aimed at improving the reliability of its electric and gas services, as well as modernizing systems to meet future demand. Looking ahead, the company plans to spend nearly $3 billion over the next five years on various projects, including upgrades to its transmission network and efforts to attract larger commercial customers.
Looking Ahead
For 2025, Avista is forecasting earnings per share in the range of $2.52 to $2.72. The company remains focused on growth while balancing the challenges of rising costs and regulatory oversight. With a steady customer base and ongoing infrastructure investments, Avista appears to be positioning itself for long-term stability, though future earnings will depend on how well it manages expenses and regulatory challenges.
Financial Health and Stability
Avista, like most utilities, operates with significant debt. That’s not necessarily a problem as long as cash flows remain strong, but there are some red flags in the numbers.
- Total debt sits at $3.15 billion, compared to just $31 million in cash.
- The debt-to-equity ratio is high at 121.54%, meaning the company is carrying more debt than equity.
- The current ratio of 0.85 suggests Avista may not have a ton of short-term liquidity.
The good news is that utilities generally have steady demand, and Avista can pass some costs onto customers through rate adjustments. However, if borrowing costs rise or if regulators push back on price hikes, financial flexibility could take a hit.
Valuation and Stock Performance
From a valuation perspective, Avista looks reasonably priced but not necessarily cheap.
- The trailing P/E ratio is 17.24, while the forward P/E is slightly lower at 15.20.
- Price-to-book (P/B) stands at 1.22, which is slightly below its historical average.
- The stock is currently trading near the middle of its 52-week range, having bounced off a low of $33 but still below the high of $40.21.
With a beta of just 0.45, Avista isn’t a volatile stock, making it attractive for investors who prioritize stability. However, its enterprise value-to-EBITDA ratio of 10.38 suggests it’s not particularly cheap either. For those looking to initiate a position, it may be worth watching for a better entry point if the stock experiences a pullback.
Risks and Considerations
While Avista’s dividend looks solid, there are a few risks that investors should be aware of.
Earnings Pressure
Quarterly earnings have dropped 20% year-over-year, which could impact the company’s ability to maintain dividend growth in the future. Management will need to address this decline to keep investor confidence intact.
High Debt Load
With over $3 billion in debt and limited cash reserves, Avista is highly leveraged. This isn’t unusual for a utility, but rising interest rates could make refinancing more expensive.
Regulatory Challenges
As a regulated utility, Avista must seek approval for rate hikes. If regulators push back on price increases, it could limit revenue growth and put additional strain on earnings.
Weather and Demand Fluctuations
Energy demand can vary significantly based on weather conditions. A mild winter or cool summer can lead to lower usage, which can impact revenues.
Slow Dividend Growth
While the company has a long track record of dividend increases, the growth rate of around 4% per year may not keep pace with inflation over time. Investors looking for higher dividend growth might find better opportunities elsewhere.
Final Thoughts
Avista Corporation is a steady, income-generating stock that fits well in a conservative dividend portfolio. With a long history of dividend growth and a yield approaching 5%, it’s an appealing option for those seeking consistent income.
That said, there are some concerns. The company’s high payout ratio, declining earnings, and significant debt burden mean that dividend growth could slow in the coming years. For investors focused primarily on dividend safety and financial stability, it may be worth keeping an eye on Avista’s earnings trends before making any long-term commitments.
It’s not the most exciting stock on the market, but for those looking for a regulated utility with a dependable dividend, Avista is a name to consider—just be sure to watch for any warning signs that could impact its future payouts.
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