Updated 3/6/25

Black Hills Corporation (NYSE: BKH) is a well-established utility company that provides electricity and natural gas to over 1.3 million customers across eight states. It has a long history of steady operations and a commitment to paying dividends, making it a stock that income investors should keep on their radar.

For those seeking stability in their portfolio, utility stocks can be a great choice. They offer predictable cash flow, a degree of recession resistance, and steady dividends. Black Hills fits that mold well, but is it an attractive buy at current levels? Let’s break down the key dividend metrics, financial health, valuation, and risks to see how it stacks up.

Key Dividend Metrics

📌 Dividend Yield: 4.50% (above the 5-year average of 3.84%)
📌 Annual Dividend: $2.70 per share
📌 Payout Ratio: 66.50% (reasonable for a utility)
📌 5-Year Dividend Growth Rate: 5.3%
📌 Dividend Streak: 54 consecutive years of payments
📌 Next Dividend Date: March 1, 2025 (Ex-dividend: Feb 18, 2025)

Black Hills is offering a higher dividend yield than its historical average, which could signal an opportunity for income-focused investors.

Dividend Overview

One of the biggest reasons investors are drawn to Black Hills is its long history of dividend payments. The company has been paying out dividends for more than 50 years without interruption, which speaks volumes about its financial stability and shareholder commitment.

Right now, the dividend yield sits at 4.50%, well above its five-year average. That suggests the stock may be trading at a slight discount. The payout ratio of 66.50% is also at a healthy level, meaning the company is distributing a reasonable portion of its earnings while still retaining enough capital for operations and growth.

For those looking for consistent income, this stock has an impressive track record.

Dividend Growth and Safety

While some dividend-paying companies grow their payouts aggressively, Black Hills takes a steadier approach. Over the past five years, dividends have increased at a rate of about 5.3% annually. It’s not the fastest-growing dividend out there, but it’s reliable and sustainable.

The biggest factor supporting Black Hills’ dividend safety is its regulated business model. Since it provides essential services, revenue is relatively predictable. This allows for consistent cash flow, which is key for maintaining and growing dividends over time.

A payout ratio of 66.50% is considered reasonable for a utility. It leaves some room for reinvestment while ensuring dividends continue to flow to shareholders.

Chart Analysis

Price Action and Moving Averages

The stock has been trading in a range between roughly $50.73 and $65.59 over the past year, with some notable swings along the way. Right now, the price is sitting at $59.69, just above the 200-day moving average (blue line) and hovering around the 50-day moving average (orange line).

This positioning suggests the stock is in a neutral zone, where it’s not in a strong uptrend or downtrend. The 50-day moving average has been declining slightly, which can indicate some short-term weakness, while the 200-day moving average is still rising, reflecting a longer-term uptrend. The recent cross of the 50-day moving average below the 200-day moving average could be something to watch, as that can sometimes signal a shift in momentum.

Volume and Market Participation

Trading volume has been relatively steady, with occasional spikes. There was a notable volume surge in December, which likely coincided with either an earnings release, dividend declaration, or some broader market event. More recently, volume has been moderate, indicating that traders are not aggressively buying or selling the stock.

For dividend investors, steady volume with no major outflows is a good sign. It shows that the stock isn’t facing strong selling pressure, even though it has been consolidating.

Relative Strength Index (RSI) and Momentum

The RSI at the bottom of the chart has been fluctuating, but it hasn’t reached extreme levels. Currently, it appears to be sitting in a neutral range, meaning the stock is neither overbought nor oversold. This reinforces the idea that the stock is in a consolidation phase, waiting for a catalyst to push it decisively in one direction.

Back in October and December, RSI was higher, showing stronger momentum at those points, but it has cooled off in recent weeks. If RSI starts trending upward again, it could signal renewed buying interest.

Recent Candle Formations

Looking at the last few candles, price action has been fairly stable. The most recent candlestick suggests some intraday volatility, with a low of $59.06 and a high of $59.98, but ultimately closing near where it opened. This type of movement typically signals indecision, where neither buyers nor sellers are taking full control.

The prior candles show a gradual push upward, indicating some buying support. However, the presence of longer wicks in recent sessions suggests some hesitation, meaning there could be overhead resistance around current levels.

Key Levels to Watch

There seems to be some support around the $58.50 – $59.00 zone, which coincides with both the 50-day and 200-day moving averages. If the stock can hold above these levels, it could build a stronger base for a potential upward move.

On the other hand, resistance is likely around $62.50 – $63.00, where the stock previously struggled to hold gains. If it breaks through that area, it could retest the $65.00 range, where it peaked a few months ago.

Analyst Ratings

Analysts have recently provided a mix of perspectives on Black Hills Corporation (BKH), reflecting both optimism and caution. The consensus 12-month price target hovers around $62.25, indicating a modest potential upside from current levels.

Upgrades

In November 2023, Mizuho Securities upgraded BKH from “Underperform” to “Neutral,” setting a price target of $53. This shift suggests a more favorable view of the company’s prospects, possibly due to improved financial metrics or a more stable operating environment.

Downgrades

Conversely, there have been notable downgrades. In February 2023, RBC Capital Markets lowered its rating from “Outperform” to “Sector Perform,” reducing the price target from $81 to $68. This downgrade was attributed to broader macroeconomic and commodity-related risks that could impact the company’s performance.

Similarly, Bank of America Securities downgraded BKH to “Underperform” in February 2023, assigning a price target of $60. This action reflects concerns about the company’s future earnings potential amid changing market conditions.

Consensus Price Target

The average price target among analysts is approximately $62.25, with forecasts ranging from a low of $59.00 to a high of $66.00. This consensus suggests that analysts anticipate limited upside for BKH in the near term, reflecting a cautious outlook on the stock’s performance.

These mixed ratings underscore the importance for investors to consider both the potential opportunities and risks associated with BKH, especially in the context of the evolving economic landscape.

Earning Report Summary

Black Hills Corporation just wrapped up 2024 on a strong note, delivering solid earnings growth and making significant investments in its infrastructure. The company reported full-year earnings per share (EPS) of $3.91, which came in slightly higher than last year’s midpoint guidance. A big part of this growth came from new rate increases, customer expansion, and cost recovery measures that added $0.82 per share to the bottom line.

Revenue was steady, with operating income climbing to $503.1 million, up from $472.7 million in 2023. Net income also grew, reaching $273.1 million compared to $262.2 million last year. Despite some challenges—including mild weather impacting energy demand, unplanned power plant outages, and rising insurance costs—the company managed to offset these pressures with disciplined expense management.

Major Investments and Expansion

Black Hills continues to pour resources into infrastructure improvements. The company spent about $800 million on electric and gas infrastructure projects, with a big highlight being the first phase of the Ready Wyoming transmission expansion—its largest project to date.

Looking ahead, they’re planning even bigger moves. The five-year capital spending forecast has been bumped up 10% to $4.7 billion for the period from 2025 to 2029. That includes $1 billion in planned investments for 2025 alone.

Growth in the Data Center Space

One of the most interesting areas of expansion is Black Hills’ growing footprint in the data center industry. The company expects energy demand from existing data center customers to exceed one gigawatt, with 500 megawatts already locked in by the end of 2029. If everything goes as planned, this business could more than double its contribution to earnings per share, adding over 10% by 2029.

Dividend Growth

For income investors, there’s more good news. Black Hills’ board of directors approved a 4% increase in the quarterly dividend, marking the 55th consecutive year of dividend hikes. That’s the second-longest streak among electric and natural gas companies, making it a standout for dividend reliability.

Regulatory Updates and 2025 Outlook

On the regulatory side, Black Hills finalized settlements on rate cases in Iowa and Arkansas, leading to $40 million in new annual revenue. New rates are already in effect, helping to support future growth.

For 2025, the company is forecasting EPS between $4.00 and $4.20, signaling confidence in its strategy and ability to keep growing earnings. With solid infrastructure plans, an expanding presence in the data center sector, and a long history of dividend growth, Black Hills is staying on track for long-term success.

Financial Health and Stability

Utilities tend to carry high levels of debt due to the capital-intensive nature of their business. Black Hills is no exception.

• Total Debt: $4.38 billion
• Debt-to-Equity Ratio: 122.28%
• Current Ratio: 0.97
• Operating Cash Flow: $719.3 million

The debt-to-equity ratio above 100% is a bit high, but not unusual for a utility company. Utilities rely on borrowing to fund infrastructure projects, and because they have steady revenue, they can manage higher debt loads. However, if interest rates remain elevated, refinancing that debt could become more costly.

Cash flow from operations is strong at over $719 million, which is a positive sign. But with a negative levered free cash flow of -$199 million, it’s clear the company is reinvesting heavily. That’s something to watch, as too much capital spending without corresponding revenue growth could put pressure on dividend payments in the future.

Valuation and Stock Performance

At current prices, Black Hills looks fairly valued.

• Price-to-Earnings Ratio (P/E): 15.38x (Trailing)
• Forward P/E: 14.49x
• Price-to-Book Ratio: 1.23x
• Enterprise Value/EBITDA: 11.05x

The stock is trading near its 50-day and 200-day moving averages, hovering around $59.45. Over the past year, it has fluctuated between $50.73 and $65.59, meaning it’s closer to the lower end of its range.

Compared to its historical valuation, the stock appears reasonably priced. The dividend yield being above its 5-year average is another indicator that shares might be undervalued. For those focused on dividend income, it could be an attractive entry point.

Risks and Considerations

No investment comes without risks, and there are a few things to be mindful of with Black Hills.

High Debt Load

The company’s total debt of $4.38 billion and a debt-to-equity ratio of over 120% means it carries a significant amount of leverage. That’s common in the utility sector, but if borrowing costs rise or the company struggles with refinancing, it could impact profitability.

Capital Expenditures

Utilities require ongoing investments in infrastructure, which is necessary for growth but can weigh on cash flow. Black Hills has been spending aggressively, which is worth monitoring to ensure it doesn’t overextend itself.

Regulatory Risk

Since Black Hills operates in a regulated industry, it is subject to government oversight. Any changes in energy policies, rate adjustments, or environmental mandates could impact earnings.

Limited Growth Potential

While this stock is great for income, it’s not a high-growth investment. Revenue growth is modest, and earnings are largely driven by rate increases rather than expansion.

Final Thoughts

For income investors looking for a stable and reliable dividend, Black Hills Corporation is worth considering.

• A 4.50% dividend yield makes it an attractive income option
• 54 years of uninterrupted dividend payments show strong consistency
• Valuation appears fair, with a reasonable P/E ratio
• Debt is something to monitor, but cash flow remains strong

This stock may not deliver explosive returns, but for those looking for steady, predictable income, it remains a solid option. In the world of dividends, sometimes boring is exactly what you want.