We’ve lowered our fair value estimate to $28 per share from $29 for CenterPoint Energy, as we are concerned that the outcome of the Houston Electric rate case will be worse than the Sept. 16 administrative law judge’s proposal for decision. We are reaffirming our narrow moat and stable moat trend ratings.
The Public Utility Commission of Texas did not issue a decision at its open meeting on Nov. 14, but discussions indicated support for a 9.25% allowed return on equity and 40% equity layer. This is less constructive than the judge’s 9.42% ROE and 45% equity cap recommendation. We expect a final decision at the commission’s next open meeting on Dec. 13.
We lowered our earned ROE for CenterPoint’s electric utility operations by 40 basis points to 9.3%. Although an allowed 9.25% ROE would be below recent U.S. utility rate cases averaging about 9.5%, Houston Electric has consistently earned above its allowed ROE due to strong customer growth and income from right-of-way leases. Houston Electric is CenterPoint’s largest business, contributing roughly 35% of consolidated EPS, including equity earnings from Enable Midstream Partners.
Our lower realized ROE assumption for CenterPoint’s electric utility operations reduces our five-year consolidated EPS annual growth rate to 5% from 6%. This is at the low end of CenterPoint’s previous 5%-7% guidance through 2023. However, CenterPoint pulled this guidance at its third-quarter earnings conference call on Nov. 7. We expect a lower range centered around 5% when management re-establishes an earnings growth target range, likely when it releases fourth-quarter earnings in February.
We believe CenterPoint’s $1.15 per share annual dividend is secure, but growth could stagnate for one or two years, then average approximately 3.5% in 2022 and 2023. The dividend provides an attractive 4.5% yield as of Nov. 15, roughly 100 basis points higher than the average utility sector yield.
He estado mirando esta empresa muuuuuuy por encima porque me gustaría añadir una utility usa a mí cartera pero no me queda claro que hace::transporta o produce? Es electricidad y gas no?
Con qué empresa patria la compararías?
Principalmente transporte/distribución de electricidad y gas. Opera en ocho estados que tradicionalmente han tenido marcos regulatorios bastante “amigables” pero ahora esta Public Utility Commision de Texas le está apretando las tuercas de lo lindo. Puede que el dividendo se quede estancado un par de años.
S&P Credit Rating = BBB+
SSD Dividend Safety = 73
CenterPoint Energy owns a portfolio of energy-related businesses. Its regulated electric utility provides transmission and distribution services to more than 2.5 million customers in the Houston area, southern Indiana, and west central Ohio. The company has natural gas distribution systems in seven states serving approximately 4.5 million customers. CenterPoint owns approximately 54% of Enable Midstream Partners, a partnership consisting of natural gas processing and storage facilities and more than 21,000 miles of interstate, intrastate, and gathering pipelines in the midcontinent region.