Evergy (EVRG): A Compelling Utility Play with Dividend Growth, Regulatory Tailwinds, and Undervaluation

In the evolving landscape of U.S. utilities, Evergy (EVRG) stands out as a strategic investment opportunity, combining robust dividend growth, regulatory momentum, and a compelling valuation gap. With Citigroup's recent upgrade to a "Buy" rating and a raised price target of $89-reflecting confidence in the company's infrastructure investments and earnings trajectory-investors are increasingly positioning Evergy as a key player in the energy transition. This analysis explores how regulatory approvals in Kansas, a disciplined dividend strategy, and a widening divergence between earnings and share price create a compelling case for near-term entry.

Citi's Bullish Outlook: A Catalyst for Momentum

Citigroup analyst Ryan Levine's elevation of Evergy's price target to $89 from $79 underscores the firm's conviction in the utility's long-term fundamentals. This adjustment follows Evergy's announcement of $200 million in commitments for data center projects expected to generate 600 MW of peak demand by 2029-a critical tailwind in an era of surging AI-driven energy consumption. The firm's 2025 adjusted EPS guidance of $3.92–$4.02, despite cooler-than-expected summer weather, further reinforces operational resilience. Notably, the average one-year price target across 11 analysts now stands at $80.72, implying a 9.38% upside from the current price of $72.49. This consensus suggests that Evergy's growth story is gaining institutional traction, with Citi's upgrade acting as a catalyst for broader market recognition.

Regulatory Tailwinds: Kansas Approvals and Missouri's Uncertainty

Evergy's regulatory environment has become a pivotal factor in its valuation. In July 2025, Kansas regulators approved the company's plan to build two natural gas plants and a solar facility, despite vocal opposition from ratepayer groups and environmental advocates. The 8.6% rate increase tied to these projects, coupled with the Kansas Central rate case progress, positions Evergy to capitalize on growing demand while maintaining grid reliability. Conversely, Missouri regulators have delayed similar approvals due to cost uncertainties, creating a regional asymmetry in capital deployment. While this delay introduces near-term risk, it also highlights the potential for a regulatory breakthrough in Missouri-a development that could unlock additional earnings growth and justify a re-rating of the stock.

Dividend Consistency: A 4.1% CAGR and 3.71% Yield

Evergy's dividend growth trajectory is a cornerstone of its appeal. From 2020 to 2025, the company increased its annual dividend per share from $0.505 to $0.695, achieving a compound annual growth rate (CAGR) of 4.1%. This consistency, paired with a current dividend yield of 3.71%, makes Evergy a standout in a sector where income-focused investors are increasingly prioritizing reliability over high yields. The 73.3% payout ratio, while elevated, remains sustainable given the company's stable cash flow and conservative leverage profile. For income investors, this combination of growth and yield offers a rare balance of capital preservation and reinvestment potential.

Undervaluation: A P/E Gap and Earnings Divergence

The most compelling argument for Evergy lies in the divergence between its earnings power and current valuation. With 2025 adjusted EPS guidance of $3.92–$4.02 and a share price of $72.49 as of December 2025, Evergy trades at a forward P/E of approximately 18x. This compares to a 2025 industry benchmark of 19.5x for the U.S. utilities sector, suggesting the stock is trading at a slight discount to its peers. However, the broader market's forward P/E of 22x highlights an even starker gap, indicating that Evergy is undervalued relative to both its sector and the S&P 500. This mispricing, driven by short-term regulatory headwinds in Missouri and market skepticism about utility valuations, presents a near-term opportunity for investors who recognize the company's long-term growth drivers.

Strategic Investment Timing: A Convergence of Catalysts

The interplay of these factors-regulatory approvals in Kansas, a disciplined dividend strategy, and an undervalued P/E-creates a convergence of catalysts for strategic entry. Evergy's data center load growth, which is projected to contribute significantly to peak demand by 2029, aligns with macro trends in AI and cloud computing. Meanwhile, the company's ability to secure rate increases in Kansas ensures a stable cash flow base, even as Missouri's regulatory uncertainty lingers. For investors with a 12–24 month horizon, the current valuation offers a margin of safety while positioning them to benefit from the eventual resolution of Missouri's rate case and the broader re-rating of utilities as AI-driven demand accelerates.