3/8/25

Eversource Energy (NYSE: ES) is a well-established utility company that provides electricity and natural gas to millions of customers across the Northeast, including Massachusetts, Connecticut, and New Hampshire. As a regulated utility, it benefits from predictable revenue streams, making it a popular choice among dividend investors looking for reliable income.

However, recent financial trends have raised some concerns. While Eversource has a long history of paying dividends, increasing debt levels and a high payout ratio may impact its ability to sustain and grow those payments in the future. Let’s take a closer look at what this means for long-term investors.

Key Dividend Metrics

📈 Dividend Yield: 4.94%
💰 Annual Dividend: $3.01 per share
📅 Next Payment Date: March 31, 2025
⚠️ Payout Ratio: 125.99%
📊 5-Year Average Yield: 3.42%
📈 Consecutive Dividend Payments: 25+ years
📉 Recent Dividend Growth: 5.2% annually over the past five years

Dividend Overview

Eversource is currently offering a dividend yield of nearly 5%, which is much higher than its historical average. That suggests investors have driven the stock price down, making the yield more appealing. For those who prioritize income, this is an attractive rate, especially compared to other utility stocks.

The company’s dividend payments have been rock-solid for decades. However, a payout ratio above 100% is a red flag. Simply put, Eversource is paying out more in dividends than it earns in net income, which isn’t a sustainable long-term practice.

Investors who count on dividends can take comfort in the fact that the next payout is scheduled for March 31. But looking further ahead, the real question is whether the company can keep increasing its dividend—or if it will be forced to slow down those hikes due to financial pressures.

Dividend Growth and Safety

Dividend Growth

Eversource has been increasing its dividend steadily, with an average growth rate of 5.2% per year over the past five years. That’s respectable, but it’s not the fastest growth in the utility sector. Given the company’s financial position, future increases could be more modest than investors have seen in the past.

The good news is that management has a strong track record of maintaining and growing the dividend. However, the pace of those increases may slow if earnings don’t keep up with the rising payout.

Dividend Safety

A payout ratio of 125.99% is cause for concern. A healthy utility typically keeps its payout ratio between 60% and 80%. Eversource is well above that, meaning it’s paying more in dividends than it generates in net income.

Debt is another issue. The company’s debt-to-equity ratio is at 192.42%, which is very high for a utility. That means a significant portion of its cash flow is going toward paying interest rather than being reinvested into operations or funding dividend growth.

For now, the dividend appears safe, but if earnings don’t improve or if borrowing costs continue to rise, future hikes could be much smaller—or in a worst-case scenario, the dividend could be at risk of being cut.

Chart Analysis

Price Action and Moving Averages

Eversource Energy (ES) is showing some interesting movement based on its price action and moving averages. The stock recently closed at $60.98, rebounding from an intraday low of $58.86. The price has attempted to push back above the 50-day moving average, which has been trending downward since late last year. However, the 200-day moving average remains above current levels, acting as a resistance zone.

The stock’s inability to sustain momentum above the 200-day moving average earlier this year suggests that long-term bearish sentiment is still at play. After a sharp selloff in January and February, the recent bounce may be a short-term retracement rather than a full-fledged reversal.

Volume and Market Participation

Trading volume came in at around 2.95 million shares, which is in line with recent daily averages. There was a noticeable spike in volume during the February selloff, indicating that institutional players may have been actively reducing their positions.

The absence of a major volume surge on the recent rebound suggests that buying interest may not be strong enough to push the stock decisively higher. If volume remains muted while price attempts to reclaim key levels, there’s a chance this bounce could fade.

Relative Strength Index (RSI)

Looking at the RSI, the stock was previously in oversold territory during its February decline, dipping below 30 before staging a recovery. Currently, the RSI is trending higher but remains in a neutral zone, sitting around the 40-50 range. This suggests that the stock is neither strongly overbought nor oversold at the moment.

For bulls, a move above 60 on the RSI would indicate strengthening momentum, potentially signaling a shift toward a more sustained uptrend. However, if the RSI starts rolling over before reaching those levels, it would confirm that selling pressure remains dominant.

Recent Candlestick Behavior

The last five trading sessions have been a mix of long wicks and smaller body candles, indicating some tug-of-war between buyers and sellers. The latest candle shows a strong recovery from the day’s low, suggesting some short-term buying support. However, the previous candles with upper wicks indicate sellers stepping in at higher prices, which means resistance remains strong.

This choppy action reflects uncertainty. If the stock can break decisively above $62.50, it would signal a potential trend shift. On the other hand, if it fails to hold above $60, there’s a risk of retesting the recent lows around $57-$58.

Analyst Ratings

📉 Downgrades

Eversource Energy has seen some recent downgrades as analysts reassess its financial outlook. On February 13, Scotiabank lowered its price target from $56 to $55 while keeping a “sector underperform” rating. The reasoning behind this downgrade was concerns about slower-than-expected growth, regulatory hurdles in Connecticut, and a weaker credit profile.

Another downgrade came on January 28, when Jefferies adjusted its target from $52 to $47 with an “underperform” rating. Analysts pointed to similar challenges, noting that the company’s earnings growth may struggle to keep up with industry peers. Barclays also revised its stance on January 22, cutting the price target from $72 to $69 and assigning an “equal weight” rating. This downgrade wasn’t as bearish as others but still suggested the stock may have limited upside in the near term.

📈 Upgrades

Despite these concerns, not all analysts are bearish on Eversource Energy. Wells Fargo updated its outlook on February 13, lowering its price target from $79 to $75 but maintaining an “overweight” rating. This suggests confidence in the company’s long-term potential, even if short-term headwinds remain.

Mizuho also took a more optimistic stance, raising its price target from $62 to $68 on February 18 while keeping an “outperform” rating. Analysts cited Eversource’s strong market position, reliable dividends, and operational efficiency efforts as reasons to believe the stock could see better days ahead.

🎯 Consensus Price Target

The current analyst consensus suggests a “hold” rating for Eversource Energy. Across 12 analysts, the average twelve-month price target is $67.45, with projections ranging from a low of $47 to a high of $75.

This mixed outlook reflects a balance between concerns about growth and regulatory risks and optimism about the company’s resilience and dividend stability. Investors should keep an eye on any shifts in sentiment, especially as market conditions evolve.

Earnings Report Summary

Eversource Energy recently released its financial results for 2024, and there’s plenty to unpack. The company made a solid comeback from last year’s struggles, showing strong improvements in both earnings and operational performance.

Full-Year 2024 Performance

For the full year, Eversource reported a net income of 811.7 million, which translates to 2.27 per share. That’s a huge turnaround from the previous year, where the company had reported a net loss. On an adjusted basis, recurring earnings came in at 4.57 per share, up from 4.34 per share in 2023. This increase reflects the company’s ability to stabilize its operations and improve its financial standing after a challenging period.

Fourth Quarter Highlights

In the final quarter of 2024, the company reported earnings of 72.5 million, or 0.20 per share. That’s a notable improvement from the same quarter last year when it posted a significant loss. Adjusted recurring earnings for the quarter landed at 1.01 per share, compared to 0.95 per share a year ago. These numbers suggest that while Eversource still has challenges ahead, it’s making progress in the right direction.

Impact of Divestitures and Impairments

A big part of the earnings picture this year was Eversource’s decision to step away from offshore wind investments. This move resulted in an after-tax loss of 524 million, or 1.47 per share, for the full year. The pending sale of Aquarion Water Company also contributed to a 298.3 million loss, which impacted earnings by 0.83 per share. While these moves may have put some pressure on the bottom line in the short term, they were strategic decisions aimed at streamlining operations and focusing on core business segments.

Segment Performance

The company’s electric distribution business saw earnings grow to 1.01 billion, up from 964.3 million the year before. The natural gas distribution segment also posted gains, bringing in 289.4 million, compared to 276.9 million in 2023. However, the water distribution business took a hit, reporting 41.8 million, down from 52.1 million the prior year.

Looking Ahead

Eversource is projecting earnings per share for 2025 to be in the range of 4.67 to 4.82, with an expected 5 to 7 percent long-term growth rate over the next five years. The company also announced a 5.2 percent increase in its dividend, which is great news for income-focused investors.

On top of that, Eversource is committing 24.2 billion toward infrastructure investments in its regulated electric and gas businesses from 2025 through 2029. That’s a 10 percent increase from its previous five-year investment plan, signaling confidence in its future growth and stability.

Recognition and Industry Standing

Eversource continues to gain recognition for its corporate responsibility, earning a spot on Newsweek’s list of America’s most responsible companies for the sixth consecutive year. It was also featured in Time’s ranking of the world’s best companies, reinforcing its reputation as a well-managed and sustainable business.

Eversource’s latest earnings report shows a company that has weathered some challenges and is now positioning itself for steady long-term growth.

Financial Health and Stability

Eversource has seen solid revenue growth, with a 10.3% year-over-year increase. That’s a positive sign that the company’s core business remains strong.

However, profitability metrics aren’t as encouraging:

• Profit Margin: 6.82%
• Operating Margin: 22.58%
• Return on Equity: 5.55%

These figures indicate that while the company is generating revenue, it’s not turning that revenue into strong profits. The low return on equity suggests that shareholders aren’t seeing as much value creation as they might expect from a utility with this kind of market position.

One of the biggest concerns is debt. Eversource has $29.24 billion in total debt, which is a heavy burden. The current ratio of 0.75 means the company doesn’t have a strong liquidity position, making it more reliant on borrowing.

Utilities are generally stable investments, but in a high-interest-rate environment, companies with a lot of debt can struggle to maintain profitability.

Valuation and Stock Performance

Eversource is currently trading at a forward price-to-earnings (P/E) ratio of 12.76, which is in line with other utility companies. However, its trailing P/E of 26.86 suggests that past earnings have been weaker, which may be why the stock is under pressure.

• Price-to-Book Ratio: 1.49
• Price-to-Sales Ratio: 1.83

The stock is trading below its 52-week high of $69.01, though it remains above its recent low of $54.75. The 50-day moving average is $58.99, meaning the stock has seen some positive movement in recent weeks. However, the 200-day moving average is $61.83, indicating that the longer-term trend has been more volatile.

Investor sentiment seems to reflect concerns about debt, regulatory risks, and slowing profit growth, even though Eversource still maintains strong revenue.

Risks and Considerations

Debt and Interest Rates

Eversource’s high debt load is a significant risk. With a debt-to-equity ratio near 192%, the company is carrying more leverage than most investors would like to see in a defensive stock. If interest rates stay high, the cost of servicing this debt could eat into earnings.

Regulatory Uncertainty

As a regulated utility, Eversource must get approval for rate increases. That means it doesn’t have full control over pricing, and government agencies can put limits on how much it can charge customers. If regulators push back against rate hikes, it could squeeze profits further.

High Payout Ratio

A payout ratio above 100% isn’t sustainable forever. If earnings don’t rise, Eversource may have to slow down dividend increases—or worse, consider a cut. While that’s not imminent, it’s something income investors should keep in mind.

Stock Performance vs. Peers

Eversource’s stock hasn’t performed as well as some of its utility sector peers. The higher dividend yield looks appealing, but total return could lag if earnings growth doesn’t pick up.

Final Thoughts

Eversource Energy remains a solid choice for investors seeking a steady dividend, but there are some red flags that can’t be ignored. The high payout ratio, significant debt, and regulatory pressures make the outlook more uncertain than it has been in the past.

For investors who prioritize income, the 4.94% dividend yield is attractive. But those looking for a mix of dividends and long-term growth may want to keep a close eye on the company’s financial health in the coming quarters.

The company’s history suggests that it will do everything possible to maintain its dividend, but if earnings remain sluggish, future increases could be much smaller than what dividend investors have come to expect.