VST or D: Which Utility Stock Offers More Upside in the AI Era?

Globe and Mail

30-07-2025

The companies operating in the Zacks Utility – Electric Power industry present an attractive investment opportunity, driven by stable cash flows and the predictable earnings derived from a regulated business model. Many U.S.-focused utilities operate under long-term power purchase agreements, providing insulation from economic fluctuations. Rising electricity demand from artificial intelligence based data centers, increasing adoption of electric vehicles and the reshoring of some manufacturing activities are creating fresh opportunities for the utilities. Consistent capital investments in the adoption of new technology and the upgrade of existing infrastructure are improving operational efficiency. This allows utilities to generate reliable earnings and maintain steady dividend payouts to shareholders.
The industry is also undergoing a significant transformation amid the global push for decarbonization. Many utilities are proactively investing in clean energy infrastructure, such as solar, wind, battery storage and grid modernization. Early adopters of renewable and low-carbon technologies are well-positioned to capitalize on market expansion, benefit from lower fuel cost volatility, and attract growing interest from both institutional and retail investors. Amid this positive development, let's focus on Dominion Energy D and Vistra Corp. VST, two prominent U.S. electric utilities that are actively investing in renewable energy, making them pivotal players in the shift toward cleaner power generation.
Dominion represents a solid long-term investment, supported by its regulated utility model and reliable dividend payments. Operating across the Mid-Atlantic and Southeastern U.S., the company benefits from steady cash flows and increasing electricity demand. Dominion is actively reshaping its energy portfolio by investing in renewables like offshore wind, solar, and battery storage, while shedding non-core assets to enhance operational focus. As AI and data center power demands surge, Dominion's presence in key high-growth regions positions it well to capture emerging opportunities. This makes the company an attractive choice for investors seeking stable income and exposure to the evolving clean energy landscape.
Vistra offers a strong investment opportunity, anchored by its diversified multi-fuel generation portfolio and robust cash flow visibility. As one of the leading competitive power producers in the U.S., Vistra operates a well-balanced mix of natural gas, nuclear, solar and battery storage assets. This versatility allows the company to efficiently manage power dispatch, navigate price volatility, and benefit from renewable energy incentives. Its cost-effective thermal assets ensure reliable baseload generation, while continued investments in clean energy and storage enhance its ESG profile. With disciplined capital allocation and healthy free cash flow, Vistra is well-positioned for growth and consistent shareholder returns.
Given their strong presence in the utility sector, analyzing the fundamentals of both companies is crucial. A comprehensive comparison will shed light on which stock offers greater investment appeal and long-term value for investors.
VST & D's Earnings Growth Projections
The Zacks Consensus Estimate for Vistra's earnings per share in 2025 decreased by 0.16% and increased by 1.01% for 2026, in the past 60 days. Long-term (three to five years) earnings growth per share is pegged at 13.18%.
The Zacks Consensus Estimate for Dominion's earnings per share in 2025 remained unchanged and increased by 0.28% for 2026, in the past 60 days. Long-term earnings growth per share is pegged at 13.59%.
D & VST's Dividend Yield
Dividends are regular payments made by a company to its shareholders and represent a direct way for investors to earn a return on their investment. They are an important indicator of a company's financial health and stability, often signaling strong cash flow and consistent earnings. Utilities are known for regular dividend payments to their shareholders.
Currently, the dividend yield for Dominion Energy is 4.6%, while the same for Vistra is 0.46%.
Capital Expenditure Plans
Capital expenditure is vital for utilities as it supports infrastructure upgrades, grid modernization, and the integration of renewable energy. These investments enhance reliability, meet rising electricity demand, and ensure long-term growth, positioning utilities for success in an evolving energy landscape.
Dominion plans to invest $50 billion in the 2025-2029 period to further strengthen its operations. Vistra aims to invest $2.27 billion in 2025, up from $1.85 billion and $1.61 billion invested in 2024 and 2023, respectively.
Debt to Capital
The Zacks Utilities sector is a capital-intensive one, and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. Therefore, utilities borrow from the market and add it to their internal cash generation to fund their long-term investments.
Dominion's debt-to-capital currently stands at 58.94% compared with Vistra's debt-to-capital of 77.12%. Both companies are using higher debt to fund their business, as the industry's debt-to-capital stands at 54.08%.
Return on Equity (ROE)
ROE is an essential financial indicator that evaluates a company's efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. VST's current ROE is 87.33% compared with D's ROE of 9.51%, while the industry's ROE is pegged at 10.41%.
Valuation
Dominion currently appears to be trading at a discount compared with Vistra on a Price/Earnings Forward 12-month basis. (P/E- F12M).
VST is currently trading at 26.94X, while D is trading at 16.74X compared with the industry's 14.65X.
Price Performance
Dominion's shares have gained 3.8% in the month-to-date period compared with Vistra's rally of 2.2% and the industry's return of 1.3%.
Conclusion
Vistra and Dominion are strategically investing in their infrastructure to serve customers more efficiently and reliably.
Based on the above discussion, Dominion is currently in a better position compared with Vistra, despite the stocks carrying a Zacks Rank #3 (Hold) each. D's better dividend yield, cheaper valuation, lower percentage of debt usage and better price performance make it a better choice in the utility space.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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Dominion Energy Inc. (D): Free Stock Analysis Report
Vistra Corp. (VST): Free Stock Analysis Report