3/8/25

Entergy Corporation (NYSE: ETR) is a major player in the utility sector, providing electricity to millions of customers across the southern United States. Headquartered in New Orleans, the company operates primarily in Arkansas, Louisiana, Mississippi, and Texas. As a regulated utility, it benefits from predictable revenue streams, making it a solid choice for investors who prioritize stability and reliable income.

For dividend-focused investors, Entergy presents an interesting case. The company currently offers a forward dividend yield of 2.96%, which is decent but slightly below its historical average. More importantly, its payout ratio is quite high at 93.67%, which raises questions about how much room there is for future dividend growth. Let’s take a closer look at the numbers and assess what they mean for long-term income investors.

Key Dividend Metrics

💰 Dividend Yield: 2.96%
📈 5-Year Average Dividend Yield: 3.76%
💵 Forward Annual Dividend Rate: $2.40
🔄 Payout Ratio: 93.67%
📅 Most Recent Dividend Date: March 3, 2025
📉 Ex-Dividend Date: February 10, 2025
📊 Dividend Growth Rate (5-Year): Moderate

These figures highlight Entergy’s commitment to rewarding shareholders, but they also signal that future dividend increases may be limited due to the company’s high payout ratio.

Dividend Overview

Entergy has built a solid track record of paying dividends consistently over the years. For investors who prioritize steady income, that’s a big plus. The current yield of 2.96% provides a reasonable income stream, but it’s worth noting that this is below the company’s five-year average yield of 3.76%. That suggests the stock might be slightly overvalued compared to its historical yield levels.

The company has a trailing annual dividend rate of $2.31, with a forward projection of $2.40 for the next year. While this slight increase shows a commitment to maintaining payouts, the nearly 94% payout ratio leaves little margin for error. A payout ratio this high means most of the company’s earnings are being returned to shareholders, limiting its ability to reinvest in growth or withstand financial downturns without cutting the dividend.

Dividend Growth and Safety

Entergy’s dividend growth has been steady but not particularly impressive. Over the last five years, the company has increased its dividend modestly. However, the real concern here is sustainability.

The payout ratio, sitting at nearly 94%, is a red flag. When a company is using almost all of its earnings to pay dividends, it doesn’t leave much room for future increases. On top of that, while Entergy’s operating cash flow of $4.49 billion is strong, the company’s levered free cash flow is actually negative at -$2.01 billion. That’s a concern because it suggests the company might be relying on debt or other financing to cover dividends and capital expenditures.

What does this mean for dividend safety?

• The company has a regulated revenue model, which provides a certain level of stability.
• The high payout ratio makes future dividend increases less likely unless earnings grow significantly.
• The negative free cash flow raises concerns about how sustainable the current dividend really is over the long run.

Chart Analysis

Price Action and Trend

The chart for Entergy Corporation (ETR) shows a clear uptrend over the past year, with the stock consistently making higher highs and higher lows. The 50-day moving average is steadily climbing, and the price remains above both the 50-day and 200-day moving averages, reinforcing the bullish momentum.

There was a notable breakout around November, where the stock saw a surge in both price and volume. This sharp upward move was followed by a period of consolidation before the stock resumed its climb. More recently, the price has pulled back from its recent highs, but it is still holding above the 50-day moving average, which has acted as a support level throughout the rally.

Moving Averages

The 50-day moving average is sloping upwards and remains comfortably above the 200-day moving average, which is a sign of strength in the long-term trend. The distance between these two moving averages has widened over time, which typically suggests strong bullish momentum.

However, the price is now approaching the 50-day moving average from above, which could act as support. If the stock finds support here and bounces higher, it would indicate a continuation of the trend. If it breaks below, there could be further downside risk.

Volume Analysis

Volume has been relatively stable, with periodic spikes during major price movements. The sharp increase in volume around November coincided with a breakout, suggesting strong buying interest at that time.

More recently, volume has been elevated but not excessively high, meaning the recent pullback has not been accompanied by panic selling. If volume increases significantly on a further decline, it could signal that investors are locking in profits, which may lead to more selling pressure. On the other hand, if volume picks up on an upward move, it would confirm renewed buying interest.

RSI and Momentum

The Relative Strength Index (RSI) is trending downward but remains above oversold levels. A drop in RSI suggests that buying momentum is cooling off after an extended rally. If RSI approaches the oversold region (below 30), it could indicate a potential buying opportunity.

At its recent highs, the RSI was in the overbought territory, which could explain the recent pullback as investors took profits. The key thing to watch is whether RSI stabilizes and turns back up, signaling renewed strength, or if it continues to drift lower, which could suggest further weakness ahead.

Support and Resistance Levels

There appears to be strong support around the 50-day moving average, which has held up well during previous pullbacks. If the stock finds buying interest at this level, it could set the stage for another move higher.

On the resistance side, the recent high near $90 will likely act as the next key level. If the stock recovers and approaches this area again, it will need strong volume to break through. A failure to clear resistance could lead to another period of consolidation.

Recent Candlestick Patterns

Looking at the last five candles, there are signs of selling pressure. The most recent candle has a long upper wick, indicating that the stock attempted to push higher but faced resistance. The previous candles also show some indecision, as the stock has been fluctuating within a tight range.

If the next few candles form a strong green bar with high volume, it would signal renewed bullish momentum. However, if there are more candles with long upper wicks or bearish patterns, it could indicate continued selling pressure.

Analyst Ratings

📊 Upgrades:

🔼 Ladenburg Thalmann – In late January, analysts at Ladenburg Thalmann boosted their rating on Entergy from neutral to buy and adjusted their price target to $86.50 from $54.75. This shift reflects growing confidence in the company’s long-term potential, with analysts citing improved earnings visibility and a favorable regulatory environment as key drivers.

🔼 BMO Capital – In mid-February, BMO Capital reaffirmed an outperform rating and lifted its price target from $79.00 to $94.00. Analysts pointed to Entergy’s strong cash flow generation and its ability to maintain steady dividend payouts, which make it an appealing option for income-focused investors.

📉 Downgrades:

🔽 KeyBanc Capital Markets – In early December, KeyBanc moved Entergy from overweight to sector weight, indicating a more cautious outlook. Their primary concern was valuation—after a strong rally, the stock was seen as fairly priced, limiting near-term upside potential.

🔽 Citigroup – In early January, Citigroup maintained a neutral stance but adjusted its price target from $58.50 to $80.00. While not a direct downgrade, this revision reflects a more measured approach, with analysts citing concerns over Entergy’s high payout ratio and rising operational costs as potential risks.

📍 Consensus Price Target:

As of the latest updates, analysts have set a 12-month consensus price target of $82.14, with estimates ranging from $70.00 to $97.00. This suggests a moderate potential upside from current levels, though it also reflects some divergence in opinion on how much further Entergy can climb in the near term.

These ratings highlight a balanced mix of optimism and caution. While some analysts see continued strength in Entergy’s fundamentals, others are wary of valuation concerns and industry headwinds.

Earnings Report Summary

Entergy Corporation recently shared its latest financial results, giving investors a look at how the company performed in the fourth quarter and throughout 2024. The report highlighted steady earnings, strong industrial sales growth, and a long-term focus on infrastructure investments.

Fourth Quarter Highlights

• Earnings Per Share (EPS): Entergy posted an EPS of $0.65 on an as-reported basis and $0.66 on an adjusted basis. While in line with expectations, these numbers suggest a stable performance for the quarter.
• Revenue: The company generated $3.01 billion in revenue, showing its ability to maintain solid income. However, this figure was slightly below some market projections.
• Industrial Sales Growth: Entergy’s industrial segment saw a 15% jump in sales compared to the prior year. This growth reflects strong demand from large commercial customers and manufacturers.

Full-Year 2024 Highlights

• Earnings Per Share (EPS): For the full year, Entergy reported an as-reported EPS of $2.45, with an adjusted EPS of $3.65. This marks a consistent profitability trend.
• Weather-Adjusted Retail Sales: The company experienced a 4% increase in weather-adjusted retail sales, showing stable demand across its customer base.
• Industrial Sales Expansion: On a yearly basis, industrial sales climbed 8%, reinforcing Entergy’s growing presence in commercial energy markets.

2025 Outlook and Strategic Initiatives

• EPS Guidance: Entergy set an adjusted EPS target between $3.75 and $3.95 for 2025, signaling confidence in future earnings growth.
• Retail and Industrial Sales Projections: The company expects a 6% increase in weather-adjusted retail sales and 11-12% growth in industrial sales, suggesting strong demand momentum.
• Capital Investment Plan: Management outlined a $37 billion investment plan from 2025 to 2028, focused on renewable energy expansion and infrastructure improvements.

Management Commentary

Entergy’s CEO, Drew Marsh, described 2024 as a “transformational year” for the company. He pointed to successful execution of strategic initiatives and growing opportunities in high-demand areas like data centers. The company remains focused on modernizing its grid, expanding renewable energy projects, and positioning itself for long-term growth.

Overall, Entergy’s earnings report showcased stable financials, strong industrial growth, and a commitment to investing in future infrastructure. With a solid roadmap ahead, the company appears focused on delivering steady returns while adapting to the evolving energy landscape.

Financial Health and Stability

Balance Sheet Strength

Entergy’s financials show a mix of strengths and potential concerns. On the positive side, the company generates solid revenue, and its operating margins remain strong. However, the debt load is significant.

Right now, the company holds about $859.7 million in cash, which might seem like a lot, but when compared to its total debt of $29.31 billion, it paints a different picture. The debt-to-equity ratio of 190.28% is particularly high, even for a utility company, which typically operates with a fair amount of leverage. While utilities tend to have stable revenue, such a high level of debt means a good chunk of earnings will go toward interest payments rather than reinvestment or shareholder returns.

Profitability and Earnings Growth

• Profit margin: 8.89%
• Operating margin: 24.06%
• Return on equity (ROE): 6.95%
• Quarterly earnings growth: -71.00%

The most concerning metric here is the steep 71% drop in quarterly earnings growth. While utilities are usually known for being slow and steady, a decline of this magnitude suggests some underlying challenges. If this earnings decline continues, the company’s ability to maintain its current dividend could be in question.

Valuation and Stock Performance

Stock Price and Valuation Metrics

• Current stock price: $81.33
• 52-week range: $50.19 – $88.38
• Trailing P/E ratio: 33.13
• Forward P/E ratio: 20.88
• Price-to-book (P/B) ratio: 2.32

Looking at these valuation metrics, Entergy appears to be trading at a premium. The trailing P/E ratio of 33.13 is on the high side, suggesting that investors are paying a lot for each dollar of earnings. The forward P/E of 20.88 is a bit more reasonable, but still above where many other utility stocks trade.

Another important valuation metric is the price-to-sales ratio, which sits at 2.95. This suggests the stock is priced at a premium relative to revenue. While utilities often trade at higher valuations due to their stability, investors should be mindful that paying too much for a stock can limit future returns.

From a performance standpoint, Entergy has seen a strong rebound from its 52-week low of $50.19, but it remains below its recent high of $88.38. The stock’s beta of 0.67 indicates that it is less volatile than the overall market, which is typically a good thing for dividend-focused investors looking for stability.

Risks and Considerations

High Debt Levels

Entergy’s high debt-to-equity ratio means it carries significant leverage. This is fairly common in the utility industry, but it still poses risks, especially if interest rates remain high. Higher borrowing costs could cut into profitability and make it more difficult to sustain dividends.

Declining Earnings Growth

The company’s sharp decline in earnings growth is concerning. If earnings continue to weaken, it could lead to financial strain, potentially forcing Entergy to adjust its dividend policy.

Limited Dividend Growth Potential

With a payout ratio nearing 94%, there isn’t much room for dividend growth unless earnings rise significantly. Investors looking for strong dividend growth might not find what they’re looking for with Entergy.

Regulatory Risks

As a regulated utility, Entergy’s ability to increase rates and generate higher profits is subject to government oversight. Changes in regulations or unfavorable rate decisions could negatively impact the company’s financials.

Valuation Concerns

Given its current valuation, Entergy may not offer as much upside potential as other dividend stocks. If earnings don’t recover, the stock price could come under pressure.

Final Thoughts

Entergy has a lot of qualities that appeal to dividend investors. It provides steady income, operates in a stable industry, and has a long history of paying dividends. But there are also some real concerns.

The high payout ratio, declining earnings, and significant debt load all suggest that while the current dividend is intact, future increases may be limited. Investors who are looking for a stock with strong dividend growth potential might need to look elsewhere, but those who prioritize stability and predictable income may still find Entergy to be a reasonable option.

As with any investment, it’s important to keep an eye on the company’s financial health and whether earnings begin to stabilize. If they do, Entergy could continue being a solid dividend play. If not, there could be some bumps in the road ahead.