CenterPoint Energy: A Defensive Income Play in a High-Interest-Rate Environment

In an era of persistently high interest rates, utility stocks have emerged as a rare haven for income-focused investors seeking stability. CenterPoint Energy (CNP), a century-old energy delivery company serving over five million customers, has long been a staple of conservative portfolios. But as borrowing costs rise and economic uncertainty lingers, the question remains: Can CenterPoint Energy sustain its 2.3% dividend yield while funding a $53 billion infrastructure overhaul through 2030?

A Legacy of Dividend Stability

CenterPoint Energy has paid dividends for over 150 years, with its most recent quarterly payout of $0.22 per share in September 2025CenterPoint Energy (CNP) Dividend History, Dates & Yield^[1]. The company's dividend yield, while lower than its historical peak of 6% in 2020, remains competitive at 2.27% as of September 2025CNP - Centerpoint Energy stock dividend history, payout ratio^[2]. Crucially, its payout ratio—measuring the proportion of earnings allocated to dividends—stands at 59.29%, a level that balances shareholder returns with operational flexibilityCenterPoint Energy Inc (CNP) Stock Dividend History & Growth^[3]. This metric, while moderately conservative, suggests the company has room to navigate short-term earnings volatility, particularly as it invests heavily in grid modernization.

Strategic Infrastructure as a Growth Catalyst

The $53 billion, 10-year capital investment plan—expanded by $5.5 billion in 2025—positions CenterPoint Energy as a key player in the U.S. energy transitionCenterPoint Energy reports solid Q2 2025 results^[4]. These funds are directed toward critical projects, including:
- Electric transmission upgrades: $4.3 billion to enhance grid reliability.
- Resiliency initiatives: $500 million to reduce outage minutes, exemplified by the Greater Houston Resiliency Initiative, which achieved a 50% reduction in outages in 2025CenterPoint Energy Q2 2025 slides: EPS dips but capital plan expands^[5].
- Texas gas infrastructure: $800 million to meet surging demand, driven by a 6 GW increase in interconnection requests since early 2025CenterPoint Energy, Inc. - AnnualReports.com^[6].

These investments are not merely defensive; they are growth-oriented. By modernizing aging infrastructure, CenterPoint Energy aims to justify rate increases through regulatory approvals. For instance, recent rate cases in Indiana and Minnesota have allowed incremental bill hikes to recover infrastructure costsOUCC: CenterPoint Energy Electric Rate Case^[7]. Such recoveries are critical for maintaining earnings momentum in a high-interest-rate environment, where financing costs have already pressured Q2 2025 non-GAAP earnings by $0.03 per shareCenterPoint Energy Earnings Q2 2025 | CenterPoint Energy News^[8].

Financial Health and Credit Rating Dynamics

CenterPoint Energy's debt-to-equity ratio of 3.00 as of June 2025CenterPoint Energy Debt to Equity Ratio 2010-2025 | CNP^[9] raises valid concerns about leverage. However, its credit profile remains robust. Moody's affirmed its 'Baa2' rating in August 2024 with a positive outlookMoody's Investors Service revised outlook on CenterPoint Energy^[10], while S&P Global Ratings maintained a 'BBB+' rating with a negative outlookS&P Global Ratings affirms CenterPoint Energy at^[11]. These divergent assessments reflect a nuanced reality: While the company's leverage is elevated, its regulated utility model and stable cash flows mitigate default risk.

The high-interest-rate environment poses a dual challenge. On one hand, increased financing costs have dented short-term earnings. On the other, CenterPoint Energy's ability to fund its $53 billion plan without issuing new equityCenterPoint Energy Expands Capital Plan to $53 Billion, No New Equity Needed^[12] demonstrates disciplined capital management. This approach, combined with a trailing twelve-month FFO-to-debt ratio of 13.9%CenterPoint Energy Q1 2025 slides: EPS dips but company reaffirms guidance^[13], underscores its capacity to service debt while maintaining dividend payments.

Dividend Sustainability in a High-Cost World

Despite headwinds, CenterPoint Energy's dividend appears sustainable for the foreseeable future. Its 2025 non-GAAP EPS guidance of $1.74–$1.76—a 8% increase over 2024—provides a buffer against rising interest costsCenterPoint Energy reports solid Q2 2025 results^[14]. Moreover, the company's long-term EPS growth target of 6%–8% annually through 2030CenterPoint Energy, Inc. - Fitch Ratings^[15] aligns with its infrastructure-driven strategy.

However, risks persist. A Dividend Sustainability Score (DSS) analysis suggests potential challenges in maintaining growthCNP: Dividend Analysis - CenterPoint Energy Inc at date 2025 08^[16], and the negative free cash flow from capital expenditures could strain liquidity if earnings fall short of projections. Investors must weigh these risks against the company's regulatory tailwinds and its track record of completing projects ahead of schedule, such as the Greater Houston Resiliency InitiativeCenterPoint Energy reports solid Q2 2025 results^[17].

Conclusion: A Prudent Bet with Caveats

CenterPoint Energy's combination of a long-standing dividend tradition, strategic infrastructure investments, and regulatory support makes it a compelling defensive play. While its high debt levels and exposure to interest rate fluctuations warrant caution, the company's ability to secure rate base increases and execute capital projects efficiently strengthens its case. For income investors willing to tolerate moderate volatility, CenterPoint Energy offers a rare blend of stability and growth potential in today's market.