IDACORP: A Steady Beacon in a Volatile AI World

Eli GrantFriday, Jun 13, 2025 8:21 am ET
157min read

As artificial intelligence reshapes industries and markets swing between euphoria and panic, investors increasingly seek refuge in predictable cash flows and steady dividends. IDACORP, Inc. (IDA), the regulated utility serving Idaho and Oregon, offers just that: a business model rooted in stability, a 13-year dividend growth streak, and a valuation discount relative to peers. But is this a diamond in the rough—or a trap for the unwary?

The Utility Shield Against AI Volatility

Utilities like IDACORP are the quiet giants of the market. Regulated by state commissions, they provide essential services with predictable revenue streams, insulated from the disruptive whims of tech cycles. IDACORP's core business—transmitting and distributing electricity to 550,000 customers—has delivered consistent earnings even as AI stocks like NVIDIA and C3.ai soar and crash.

The Dividend Machine: 13 Years of Growth

IDACORP's crown jewel is its dividend track record. With increases every year since 2011, its payout has grown by 8.1% annually, far outpacing inflation. The latest quarterly dividend of $0.86 per share (yielding 2.97%) is well-covered by earnings (61% payout ratio) and cash flow (36.8%). For income-focused investors, this is a rare blend of growth and security in an era where high-yield tech stocks often lack both.

Valuation: A Discounted Dividend Champion

Despite its strong fundamentals, IDACORP trades at a P/E of 20.46, below its five-year average of 20.16 and modestly lower than peers like Hydro One (24.10) and MGE Energy (25.18). Its Forward P/E of 19.35 hints at undervaluation, as analysts expect earnings growth to outpace current stock prices. For investors seeking a “buy what you see” play, IDACORP's valuation offers a margin of safety compared to growth stocks inflated by AI hype.

Risks: The Clouds on the Horizon

No investment is without risk. IDACORP's challenges include:
- Regulatory Costs: Rate hikes require state approval, which can delay profit recognition.
- Weather Dependency: Droughts or heatwaves strain hydropower and demand, as seen in 2021 when low rainfall hurt earnings.
- Shareholder Dilution: A $500 million equity offering in May 2025 raised red flags, potentially diluting long-term returns.

The Snowflake Score's warning on free cash flow coverage (below 1x) also suggests dividend sustainability hinges on disciplined capital allocation.

Strategic Moves: Betting on the Grid of Tomorrow

IDACORP is investing in resilience. Its $1.2 billion capital plan through 2026 prioritizes grid modernization, renewable energy, and wildfire prevention—a necessity in fire-prone western states. The company's shift toward hydroelectric and natural gas (now 41% of generation) reduces reliance on coal, aligning with ESG trends while meeting state clean energy mandates.

The Bottom Line: A Defensive Play with Upside

In a market obsessed with AI's next disruption, IDACORP is a throwback to a simpler era: predictable cash flows, regulated returns, and dividends that outlast tech cycles. While risks like dilution and weather exist, they're mitigated by its fortress-like balance sheet and 100-year track record.

For investors seeking income and stability, IDACORP is a compelling buy at current levels, especially as utilities often outperform during rate hikes or economic uncertainty. Monitor its free cash flow trends closely, but for now, this is a stock to anchor a portfolio in turbulent times.

In a world racing toward the future, sometimes the best strategy is to bet on what works today. IDACORP, with its steady grid and growing dividend, is proof that old economy can still shine.

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