Updated 3/11/25
MGE Energy, Inc. (NASDAQ: MGEE) has been providing electricity and natural gas to customers in Wisconsin for over a century. As a regulated utility, the company operates in a stable environment with predictable revenue, making it an appealing choice for income-focused investors. While MGEE isn’t the flashiest stock on the market, it has built a strong reputation for reliability, steady growth, and consistent dividend payments.
For those looking for a dependable dividend stock that can weather market fluctuations, MGEE is worth a closer look. With nearly 50 years of consecutive dividend increases, it stands as a beacon of stability in an uncertain economic climate. Below, we’ll dive into the company’s dividend profile, financial health, valuation, and potential risks.
Key Dividend Metrics
📈 Dividend Yield: 1.95%
💰 Annual Dividend Payout: $1.80 per share
📅 Most Recent Dividend Payment: March 15, 2025
🔄 5-Year Average Dividend Yield: 2.11%
⚖️ Payout Ratio: 52.70% (A balanced and sustainable level)
📈 Dividend Growth Streak: 48 consecutive years
MGEE’s dividend track record is impressive, but what does that really mean for long-term investors? Let’s break it down.
Dividend Overview
With a dividend yield of 1.95%, MGEE may not stand out among high-yield stocks, but its consistency is what makes it appealing. The company has a long history of rewarding shareholders with growing payouts, and its five-year average yield of 2.11% suggests a relatively stable range.
One of the most reassuring aspects of MGEE’s dividend is its payout ratio, which sits at 52.7%. This means the company is distributing just over half of its earnings to shareholders while keeping the rest for reinvestment and operational stability. In the utility sector, where revenues are predictable, this payout level is considered very sustainable.
The real standout metric is the company’s commitment to dividend growth. With 48 consecutive years of increases, MGEE is on the verge of joining the elite group of Dividend Kings—companies with 50+ years of dividend growth. This kind of track record doesn’t happen by accident; it’s a testament to sound management and a resilient business model.
Dividend Growth and Safety
MGEE has been growing its dividend at a modest but steady pace. Over the past five years, annual dividend increases have averaged between 4-5%. While not the fastest-growing dividend stock, it does provide a level of consistency that many investors find reassuring.
Several factors support MGEE’s ability to continue raising dividends:
- Stable cash flow from regulated utility operations
- Reasonable debt levels, keeping financial flexibility intact
- A manageable payout ratio, allowing for continued reinvestment
One point to keep an eye on is the company’s negative levered free cash flow of -$19.61 million. This suggests that MGEE is currently spending more on capital projects than it generates in free cash after debt payments. While this isn’t necessarily a red flag—utilities frequently invest in infrastructure—it’s a trend that investors should monitor.
Chart Analysis
Price Action and Moving Averages
The chart shows that MGEE has experienced a strong upward trend over the past year, followed by a period of correction. The 50-day moving average (orange line) was trending above the 200-day moving average (blue line) for most of the past year, confirming a bullish phase. However, a significant spike in price in late 2024 led to a sharp pullback, which resulted in the stock dipping below the 50-day moving average in early 2025.
More recently, the stock has been testing the 50-day moving average from below and is now trading slightly above it at 92.78. This could indicate an attempt to reclaim momentum, but the 50-day moving average is sloping downward, suggesting some lingering weakness. The 200-day moving average continues to trend upward, which signals that the broader uptrend remains intact.
Recent Candlestick Activity
Looking at the latest five candlesticks, there is a mix of indecision and attempts to push higher. The wicks on both ends of the candles suggest that buyers and sellers are actively battling for control. The most recent candle closed slightly lower than the opening price, forming a small-bodied candle, which can indicate hesitation in the market.
The low of 91.05 for the day suggests that there was some downside pressure, but buyers stepped in to push the price back toward the close at 92.78. Volume remains relatively low, which may indicate a lack of strong conviction in either direction. If volume starts to increase while the stock pushes above the 50-day moving average, it could confirm a more sustainable breakout.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart shows that momentum has been recovering after dipping into a weaker zone earlier in the year. RSI had previously spiked above 70 during the strong rally in late 2024 but has since cooled off. Currently, RSI is moving toward the middle of the range, which suggests that the stock is neither overbought nor oversold.
If RSI continues to rise and moves closer to the 60-70 range, it could indicate that momentum is shifting back in favor of buyers. However, if RSI turns downward, it may suggest that the recent price action is just a short-term bounce rather than the start of a new trend higher.
Volume and Market Interest
Volume has remained relatively low compared to the spike seen during the late 2024 rally. This suggests that the recent recovery attempt lacks strong participation from investors. Typically, a meaningful reversal or breakout needs confirmation through higher volume. If the stock starts pushing higher while volume increases, it would signal that more buyers are stepping in.
On the flip side, if volume remains muted, the stock could continue to drift sideways or retest recent lows. A key area to watch will be whether MGEE can maintain levels above the 50-day moving average with increasing volume, which would be a more bullish signal.
Analyst Ratings
Downgrades
📉 In December 2024, MGEE received a downgrade to “strong sell” from analysts at a major investment firm. This shift was largely driven by concerns over the company’s valuation. The stock had been trading at a higher-than-average price-to-earnings ratio, making some analysts question whether further upside potential was limited. Given the utility sector’s typically stable but slow-moving nature, analysts felt that MGEE’s premium valuation was outpacing its fundamental growth.
⚠️ Another downgrade came from a leading Wall Street firm, which lowered its price target from $68 to $65 in mid-2024. Analysts cited concerns over MGEE’s progress in expanding its renewable energy portfolio, which has become an increasingly important factor in the energy sector. Delays in rolling out clean energy projects and uncertainties in regulatory approvals were flagged as potential risks that could impact long-term growth.
Upgrades
📈 On the brighter side, MGEE’s Relative Strength (RS) Rating was upgraded from 69 to 73 in February 2025. This metric measures the stock’s price momentum relative to the broader market, and the upgrade suggests that MGEE has shown strength compared to other stocks over the past year. A rising RS Rating often signals growing investor confidence, particularly in a stock that has experienced a period of consolidation.
🔄 Some analysts have also maintained their “hold” or “moderate buy” ratings, citing MGEE’s strong track record of dividend growth and stable cash flow. While valuation concerns remain, the company’s ability to generate consistent returns for shareholders has kept some investors optimistic about its long-term potential.
Consensus Price Target
💰 The current consensus price target for MGEE stands at $74.00, which is below the recent trading levels. This suggests that analysts, on average, expect the stock to trade slightly lower over the next 12 months. Investors may see this as a sign to evaluate whether MGEE’s current price reflects its fair value, particularly given its premium valuation compared to peers.
🔎 The mixed outlook from analysts highlights both the strengths and challenges of MGEE at this point. While its solid fundamentals and dividend stability continue to attract income-focused investors, concerns over valuation and growth strategy execution have led to a more cautious stance from some analysts.
Earnings Report Summary
MGE Energy wrapped up 2024 on a solid note, showing steady financial performance despite a few challenges along the way. The company continues to benefit from its focus on renewable energy while dealing with some of the ups and downs that come with the utility business.
Full-Year Performance
For the full year, MGE Energy reported earnings of $120.6 million, which translates to $3.33 per share. That’s a slight increase from the previous year when earnings came in at $117.7 million or $3.25 per share. While it’s not a dramatic jump, it’s another year of consistent growth, which is exactly what long-term investors want to see.
Fourth-Quarter Highlights
In the final quarter of the year, the company posted earnings of $22.0 million or $0.61 per share, up from $20.1 million or $0.55 per share in the same period last year. That’s a respectable improvement, especially considering how utility companies can sometimes struggle with seasonal factors affecting demand.
Strength in the Electric Segment
A big driver of MGE’s performance was its electric segment, which saw growth thanks to continued investment in renewable energy. The Paris Solar Project, completed in December, played a role in boosting the company’s clean energy footprint. These types of projects not only help the environment but also position MGE well for future regulatory changes and shifting consumer demand.
Challenges in the Gas Segment
On the other hand, the gas segment saw a slight decline, with retail gas deliveries dropping 4 percent year-over-year. The main culprit? Warmer-than-usual weather, which meant customers simply didn’t need to use as much gas. Both residential and commercial gas usage were down by about the same percentage. While this isn’t a major concern, it does highlight how weather fluctuations can impact short-term results.
Revenue and Operating Income
For the year, operating revenue came in at $676.9 million, slightly lower than the $690.4 million reported in 2023. Even with the dip in revenue, operating income remained stable at $146.3 million, nearly unchanged from the prior year. This consistency is a sign that MGE is managing costs well, even as it invests in growth.
Looking Ahead
MGE Energy remains focused on expanding its renewable energy infrastructure, which should set it up for long-term growth. The company’s continued push toward clean energy projects reflects a broader industry shift and aligns with regulatory trends. While short-term fluctuations in gas demand and revenue may happen, MGE’s steady approach and strong financial footing keep it in a good position moving forward.
Financial Health and Stability
A closer look at MGEE’s financials reveals a company that is in good shape but does carry some risks.
- Profit margin: 18.27% (solid for a utility)
- Return on Equity (ROE): 10.17% (indicating efficient use of capital)
- Current ratio: 1.81 (good short-term liquidity)
- Total debt: $796.59 million (manageable given stable cash flows)
MGEE isn’t a cash-heavy company, holding just $21.3 million in cash. However, utilities don’t typically sit on large cash reserves because they have steady incoming revenue. The company’s financial standing looks solid overall, though continued infrastructure investments will require careful management.
Valuation and Stock Performance
At $93.37 per share, MGEE is trading at a trailing price-to-earnings (P/E) ratio of 27.75. This is on the high side for a utility stock, indicating that investors are willing to pay a premium for MGEE’s stability.
- Price-to-book ratio: 2.74 (suggesting the stock isn’t cheap)
- Enterprise Value/EBITDA: 15.18 (moderate, not overly expensive)
- 52-week range: $72.27 – $109.22 (currently in the middle of its yearly range)
MGEE’s stock is currently trading above both its 50-day and 200-day moving averages, showing some positive momentum. While utilities aren’t usually known for rapid price appreciation, MGEE has managed to hold up well, even in a challenging economic environment where higher interest rates have weighed on many dividend-paying stocks.
Investors considering MGEE should be aware that its premium valuation may limit near-term upside potential. That said, the stock’s appeal lies more in its long-term dividend growth than in aggressive capital gains.
Risks and Considerations
While MGEE is a strong dividend stock, it does come with a few risks that investors should keep in mind.
⚡ Regulatory Challenges: As a regulated utility, MGEE’s ability to set rates and generate revenue is controlled by government agencies. Any unfavorable changes in regulations could impact earnings.
📉 Interest Rate Sensitivity: Rising interest rates can make dividend stocks less attractive compared to bonds, potentially putting downward pressure on MGEE’s stock price.
🌍 Transition to Renewable Energy: MGEE has committed to increasing its renewable energy capacity. While this is positive for long-term growth, the transition will require significant capital investment, which could temporarily impact cash flow.
🏢 Smaller Market Cap: With a market capitalization of $3.37 billion, MGEE is a relatively small utility stock. While this allows for some growth potential, it also makes the stock more susceptible to volatility than larger utility peers.
Final Thoughts
MGEE is a stock that delivers stability, not excitement. Its nearly five-decade-long track record of dividend increases makes it an appealing choice for long-term investors who prioritize steady income over high yields. While the stock isn’t cheap at current levels, its consistency and financial strength make it a solid pick for those looking for a reliable dividend payer.
For investors who want a defensive, income-focused stock with predictable cash flows, MGEE is a name worth considering. The company’s history of steady growth, balanced payout ratio, and commitment to sustainability make it a strong player in the utility sector.
Recent Comments