Key Highlights
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The U.S. government is increasingly adopting nuclear energy in response to rising energy demands.
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Constellation Energy is the leading nuclear energy company in the U.S., having formed partnerships with Microsoft and Meta Platforms.
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The company’s stock may significantly increase its dividend in the coming years, offering substantial income potential.
- 10 stocks we prefer over Constellation Energy ›
While many may feel uneasy about nuclear energy due to associations with atomic weapons or past disasters like Chernobyl, modern nuclear power is clean, efficient, and safe.
Nuclear energy generates electricity through controlled fission reactions, where atoms are split to produce heat that drives large steam turbines. The growing energy needs in the U.S. are fueling interest and investments in nuclear power for the foreseeable future.
Constellation Energy’s Advantage in Nuclear Growth
Demand for nuclear power is rising sharply. Former President Donald Trump set ambitious targets for electricity production, aiming for 400 gigawatts (GW) by 2050—nearly quadrupling current output—and initiating plans for 10 new large reactors and upgrades totaling 5 GW by 2030.
However, the construction of nuclear reactors is complex and heavily regulated. Constellation Energy, being the largest producer of carbon-free energy in the U.S., is well-positioned with its fleet of nuclear power facilities, boasting a combined capacity of 22.1 GW—more than double that of its nearest competitor.
This leadership can help Constellation navigate regulatory challenges more effectively and carry out new constructions and upgrades. The company has also collaborated with leading artificial intelligence firms, restarting a reactor at Three Mile Island to provide power to Microsoft under a 20-year agreement and arranging a similar contract with Meta Platforms for its Clinton Clean Energy Center in Illinois.
Potential for Dividend Growth at Constellation Energy
Currently, Constellation Energy’s dividend yield sits just above 0.5%, which may not be particularly appealing to income-seeking investors. However, considering the long term, the potential for significant dividend growth is far more impactful than the initial yield.
With a dividend payout ratio of only 17% based on full-year 2025 earnings estimates and anticipated annual earnings growth of 15% over the next three to five years, the company is well-positioned to raise its dividends at a double-digit rate without straining its payout ratio. Continued dividend growth over decades could transform these payments into a substantial income source by retirement.
Should You Invest in Constellation Energy?
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Justin Pope is invested in Microsoft. The Motley Fool recommends Constellation Energy, Meta Platforms, and Microsoft. For full disclosure, visit the disclosure policy.
The opinions expressed here are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
