If you are a dividend investor, you likely own an utility because many utilities have a monopoly like position in their area of service. In addition, the regulators of the utility tend to increase price of the kilowatt on a regular basis to ensure the profitability of the utility. As an investor there is much to like about utilities.

The big excitement among utilities is AI and the data centers it needs to run the AI models and increasing usage for customers as corporations use AI more and more. Those demand drivers are wonderful news to executives at utilities because they can add more produce more electrical power and the demand from the centers will pay the bills for the added production. This demand is leading to mergers.

In an article from the New York Times News Service, NextEra Energy has announced plans to merge in an all-stock deal with Dominion Energy.

NextEra Energy is based in Florida and the retail brand is Florida Light and Power has a market value of $194 billion while Dominion has a market value of $54 billion. Dominion is based in Virginia and also operates retail utilities in North and South Carolina.

The combined company would serve 10 million customers, and the CEO of NextEra would stay as Chair and CEO while Robert Blue current CEO of Dominion would be CEO of the company’s regulated utilities and be a director. For those being served by Dominion, the name would not change.

The reason for the merger is electricity demand is rising faster than it has in decades and scale matters more than ever.

One should expect more mergers and acquisitions will happen in the utility sector.

Linking to dividend paying stocks, while there is competition in every sector, in the utility sector because of the need for continuous electricity, it was easier to set up a series of independent utilities to ensure the lights do not go out. The system has evolved and many investors have benefited from owning utilities and the dividends continue to be paid. For many years, you would compare the yield or dividend rate against owning bonds, but now there are growth opportunities in the sector. Buy them for the yield, but sometimes a merger will happen.

There are more questions than answers, till the next time – to raising questions.