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Key Takeaways:
- CMS Energy offers a 3.1% dividend yield and 19 consecutive years of dividend growth, backed by stable, regulated utility earnings.
- Based on consensus analyst estimates, investors could see total returns of around 15.8% by 2027 if earnings grow as expected and the stock’s valuation improves.
- The dividend is well-covered, with a consistent 60% payout ratio and room for continued increases.
CMS Energy is a regulated utility company that delivers electricity and natural gas to more than 6 million people across Michigan.
Over 95% of its earnings come from fully regulated operations, meaning the company earns a steady return based on rates approved by state regulators instead of relying on market swings. This setup gives CMS reliable cash flow and a solid foundation for long-term dividend growth.
The company continues to invest in grid upgrades, clean energy projects, and infrastructure, while returning capital to shareholders through a growing dividend.
But like many utilities, CMS has been under pressure from rising interest rates and weak investor sentiment across the sector. The stock has pulled back, even though the business remains strong and earnings are still growing.
Now, with a 3.1% dividend yield, improving outlook, and a history of consistent performance, CMS might be one of the more compelling dividend opportunities in the utility sector right now.
Analysts Think the Stock Is Undervalued Today
CMS shares currently trade around $72/share, while analyst valuation models suggest the stock could reach ~$83/share by 2027, assuming steady earnings growth and a small valuation rebound.
That would imply a 15.8% total return over the next 2.4 years, or about 6.2% annually, when dividends are included.
While it’s not a massive upside, it’s meaningful for a conservative dividend stock. CMS offers the kind of reliable income and capital preservation many long-term investors want in today’s market.
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CMS’s Dividend Yield Is Elevated by Weak Sentiment
CMS’s forward dividend yield is currently 3.1%, which is just about in line with its 5-year average dividend yield.
Over the past two years, CMS stock has lagged due to rising interest rates and broad investor rotation away from utilities. Meanwhile, CMS kept increasing its dividend, which pushed the yield higher.
The business itself is in good shape. CMS still gets over 95% of its earnings from regulated operations, which helps keep its cash flow and dividends steady. But with utilities out of favor and valuations not moving much, the upside looks limited.
Based on our assumptions, CMS could likely deliver around 6% annual returns through 2027, which would come from the dividend and some modest earnings growth. It’s not a high-flyer, but for investors who want something stable with a solid yield, it could be a decent fit.
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CMS’s Dividend Safety Remains Strong
In January 2025, CMS reaffirmed its goal of growing earnings by 6% to 8% a year, with dividend growth of around 6% annually. This shows the company is confident it can keep delivering steady results and rewarding shareholders.
For 2025, CMS is expected to earn $3.58/share and pay out $2.18/share in dividends, putting the payout ratio around a healthy 60%. By 2027, earnings could rise to $4.15/share, with the dividend growing to $2.42/share, while the payout ratio stays stable.
This growth is supported by investments in clean energy, grid modernization, and a constructive regulatory environment in Michigan.
CMS has raised its dividend for 19 straight years. By growing the payout alongside earnings, the company has built a dividend investors can count on.
See CMS Energy’s full growth forecast and analyst estimates. (It’s free) >>>
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
