While investors are still betting on the explosive growth of data centers and the ever-increasing electricity they require, one dividend stock deserves a closer look, which is Xcel Energy (XEL).
This regulated utility is uniquely positioned, offering investors a steady dividend alongside exposure to the energy backbone of the digital economy.
With major hyperscalers such as Alphabet (GOOG) (GOOGL) signing power agreements and Xcel expanding its capabilities to serve large data center loads across its footprint, the company stands to benefit from enduring structural demand for electricity, particularly as cloud computing, artificial intelligence, and hyperscale facilities continue to proliferate.
Coupled with a long track record of dividend increases and strategic infrastructure investments designed to capture new load growth, XEL makes for a compelling pick in the current market.
About Xcel Energy Stock
Xcel Energy is a leading regulated electric utility and natural gas delivery company headquartered in Minneapolis, Minnesota. Through its four operating utility subsidiaries, Northern States Power-Minnesota, Northern States Power-Wisconsin, Public Service Company of Colorado, and Southwestern Public Service Company, Xcel provides electricity and natural gas to millions of customers. Xcel has also committed to ambitious clean-energy goals, including achieving carbon-free electricity by 2050. XEL’s market cap sits near approximately $49.4 billion.
XEL has demonstrated measurable positive returns, reflecting both its defensive utility status and growing investor interest tied to secular trends like data center demand. Over the past 52 weeks, the stock has surged 19.29% with its 52-week high of $84.23 reached on Feb. 25, as the market reacted positively to its dividend increase news and a major clean-energy supply agreement with Google to power a new data center in Minnesota, underscoring its position in meeting surging electricity needs tied to AI and digital infrastructure.
Year-to-date (YTD), XEL has produced 13.1% returns, significantly outperforming the broader market benchmarks during the same period.
The stock is currently trading at 20.41 times forward earnings, which is a modest premium to the sector median.
Xcel Energy offers a steady, growing dividend that appeals to income-focused investors in the utility space. Xcel Energy recently raised the quarterly dividend from $0.57 per share to $59.25 cents per share, bringing the annualized payout to $2.37 per share. The dividend will be payable on Apr. 20 to shareholders of record as of Mar. 13. The increase marks the company’s 23rd consecutive year of dividend growth.
CEO Bob Frenzel reaffirmed Xcel’s commitment to predictable and sustainable dividend growth, targeting annual increases of 4% to 6% and maintaining a payout ratio of 45% to 55%. Its current payout ratio stands at around 60.2%.
XEL Is Advancing in Reaping Data Center Benefits
Xcel Energy stands to benefit substantially from the rapid expansion of data center demand driven by cloud computing, AI and hyperscale infrastructure that requires vast and reliable power supply. The company has been actively positioning itself as a key energy partner for large data center loads by signing long-term power agreements and expanding its capacity pipeline.
For instance, Xcel’s utility subsidiary secured a 200 MW electric service agreement with Fermi America last year to supply power for a major AI-focused data center campus in Amarillo, Texas, which will scale as the facility grows.
On the strategic front, earlier this month, Xcel signed a memorandum of understanding (MOU) with NextEra Energy (NEE) to co-develop generation, storage, and transmission resources tailored to serve large load customers such as data centers, helping streamline infrastructure build-outs and improve delivery timelines.
Also, the company has boosted its contracted data center capacity target to about 6 GW by the end of 2027, reflecting both deepening demand and its ambition to capture a meaningful share of future energy needs.
Perhaps most notably, Xcel recently announced it will power a new Google data center in Pine Island, Minnesota, with an agreement that includes bringing 1,900 MW of new clean energy onto the grid, backed by Google’s investment in new generation and storage capacity.
Stable Financial Performance
Xcel Energy reported its Q4 and full-year 2025 financial results on Feb. 5. In the fourth quarter, Xcel reported operating revenues of $3.6 billion, a 14.1% year-over-year (YOY) increase and ongoing EPS of $0.96 compared with $0.81 a year earlier, an 18.5% YOY improvement driven by higher electric rates and load growth. Segment detail showed electric revenues growing around 16.6% and natural gas revenues up about 6% in the quarter.
For the full year, total revenues reached $14.7 billion in 2025, up 9.1% from $13.4 billion in 2024, reflecting growth in electric and natural gas sales. Also, ongoing EPS rose to $3.80 from $3.50, an 8.6% YOY increase as infrastructure investment recoveries and sales growth outweighed higher operating costs.
Management reaffirmed its 2026 EPS guidance of $4.04 to $4.16.
Analysts forecast EPS of $4.11 for fiscal 2026, an 8.2% YOY jump, followed by a further 9% rise to $4.48 in 2027.
What Do Analysts Expect for Xcel Energy Stock?
Recently, UBS upgraded Xcel Energy from “Neutral” to “Buy” and lifted its price target to $89 from $81, citing the utility’s EPS growth profile and rising data center load demand that it believes is not fully reflected in the stock price.
Moreover, last month, Mizuho raised its price target on Xcel Energy to $86 from $81 and reiterated an “Outperform” rating.
Overall, XEL has a consensus “Strong Buy” rating. Of the 18 analysts covering the stock, 15 advise a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining two analysts give it a “Hold” rating.
While the average price target of $89.41 suggests an upside potential of 7%, the Street-high price target of $95 indicates a 13.8% premium to current prices.
On the date of publication, Subhasree Kar did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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