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A 5% 10-year has dragged the whole utility group toward its lows. One regulated name in the hottest power market in America sits about 6% off its 52-week low, and it reports October 27.
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Meet the Pick
CenterPoint Energy (NYSE: CNP). Houston-based, regulated, delivers electricity to the greater Houston area plus natural gas across Texas, Indiana, Minnesota, and Ohio.
Market cap is around $25 billion, and shares sit in the high $30s, within about 6% of the 52-week low near $36. The trailing yield isn't why you're here. The setup is.
Action: Build a position between $37 and $40 ahead of the October 27 Q3 earnings print and the Texas rate case updates that come with it. |
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Why This One Hasn't Caught the Bid
Here's the disconnect. CenterPoint is the regulated electric utility for Houston. Houston sits in ERCOT. ERCOT is the grid everyone cites when they talk about Texas data center buildouts. And yet CNP trades like just another bond proxy.
Some of that's sentiment. The company spent 2024 wrestling with Hurricane Beryl fallout, political heat over its storm response, and a regulatory review that spooked yield-focused money. Some of it's just boredom. No flashy renewables arm to pitch you. No nuclear restart narrative for you to chew on.
But the fundamentals have reset. Beryl's in the rearview. New interim distribution rates in Houston took effect Sept. 30.
The capital plan to harden the grid and expand transmission ties directly to the same load-growth forecasts that have carried ERCOT-exposed power names higher. The market still treats CNP like a 2024 problem child. Look closer and the 2026 story's a different animal.
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Q3 Earnings Could Be the Spark
October 27 matters more than a typical print. Three things to listen for:
- Updated capex guidance tied to Texas load growth and transmission buildout
- Progress on Texas cost-recovery filings, which drive the earned-return trajectory into 2027
- Color on commercial and industrial load, specifically data center interconnect requests in the Houston service territory
If management nudges the $66.7 billion 10-year capital plan higher again and reaffirms the 2026 EPS guide of $1.89 to $1.91, that's your trigger. A move back toward the low-to-mid $40s would be 10% to 15% upside before you collect a dime of dividends.
Here's what most people miss. Utilities don't need a blowout. They need a clean print and a forward tone that confirms the growth story. Much lower bar than tech earnings.
A company that pays no dividend and reinvests everything, or one that pays out 80% of earnings -- which creates more wealth over 20 years?
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The Texas Load Growth You're Actually Buying
Strip out the noise, and you're looking at a bet on ERCOT demand, full stop. ERCOT's own long-term forecasts have peak load roughly doubling over the next decade. Data centers. Electrification. Gulf Coast LNG exports. Population growth. CenterPoint sits dead center.
Houston's one of the fastest-growing metros in the country. Layer in industrial reshoring along the Gulf and the hyperscaler build-out, and CNP operates in a service territory where every incremental megawatt of demand feeds into the rate base. Rate base feeds earnings. Earnings feed your dividend.
You don't need to buy the AI thesis to make this work. You just need Houston to keep growing, and you're paying about 18x forward earnings for it.
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What the Numbers Actually Say
Shares sit about $7 below the 52-week high near $45, and the stock carries the low beta you'd expect from a regulated utility. The point: you're not paying for growth here. You're buying a defensive book with an underappreciated growth kicker.
Management guided 2026 non-GAAP EPS to $1.89 to $1.91, about 8% growth, backed by a $66.7 billion 10-year capital plan that's mostly recoverable through regulated mechanisms. Not speculation. That's just what regulated utilities do, mechanically, once the rate base gets approved.
If Q3 confirms the trajectory, downside at this price is modest, and upside is a move back toward the 52-week high.
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The Dividend Angle
CenterPoint pays $0.96 annually, $0.24 a quarter, good for a yield of about 2.5%. Doesn't blow the doors off next to Verizon or Realty Income. Look closer.
Payout ratio sits comfortably below 60% of earnings, which is low for a regulated utility. Management has raised the dividend every year since 2022, from $0.17 a quarter to $0.24, most recently in July, in step with rate base growth. And because that growth is funded by capex flowing into regulated earnings, your dividend isn't going anywhere.
Think about it this way. You're not buying CNP for the headline yield. You're buying a starting yield that has compounded at a high-single-digit clip, plus 10% to 15% price upside if the Q3 story lands clean.
Action: If you want a utility sleeve that pays you to wait for a specific catalyst, CNP earns a slot. Treat the $37 handle as your accumulation zone. |
What Could Blow This Up
Know the risks before you touch any regulated utility right now.
Rate case risk is real. If Texas regulators trim what CenterPoint can recover on its grid spending, the growth trajectory gets a haircut, and the stock gets repriced lower. Rates matter too. Every basis point higher on the long end makes utility yields look worse by comparison. If rates grind higher from here, your CNP position won't be immune.
There's residual political and regulatory risk from Beryl that hasn't fully worked out of the stock. And if you see a weak Q3 or soft load-growth guidance, the rebound gets pushed out a quarter or two.
The thesis isn't that CNP is risk-free. The thesis is that at this price, you're getting paid to wait on a growth story the market is valuing like an ordinary bond proxy.
Putting It All Together
Here's what you've got. Regulated utility within 6% of its 52-week low. A low-beta, regulated book. A growing dividend. The service territory is Houston and the surrounding Texas grid, the country's hottest electricity-demand story. And a real catalyst, Q3 earnings on October 27, lands in just over two weeks.
Want yield? There are richer options. Want pure growth? Faster horses out there. But if you want a defensive income position with a forward catalyst the market hasn't priced in, CNP is one of the cleaner setups I'm looking at this week. Scale in between $37 and $40 ahead of the print and let the Texas load-growth story do the heavy lifting.
Setup Scorecard
Entry Zone: $37 to $40
Target: $44 to $46 over 6 to 12 months
Stop Loss: Reassess below $35
Catalyst Timeline: Q3 earnings October 27; Texas cost-recovery filings late 2026 to early 2027
Confidence Level: Medium-High. Clean balance sheet, defensive book, real near-term catalyst. But regulated utilities need rate decisions to break their way.
That’s all for today’s edition of the Dividend Brief.
Thanks for reading, and if you have any feedback or dividend stocks you want me to take a look at, just reply to this email!
—Noah Zelvis
DividendBrief.com
