2024-07-03 01:40:12 ET
Summary
- The XLU portfolio has a substantial negative FCF estimated for the next two years of over US$14bn per year.
- High capex requirements for capacity expansion may lead to increased debt, reduced dividends, or capital raises for XLU holdings.
- Portfolio consensus price target upside potential of 9% seems reasonable, barring dividend cuts.
- In my view, better alternatives are found in equipment makers or IPPs.
Introduction
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XLU: Negative FCF May Lead To Dividend Cuts