1. Vistra Corp. (NYSE:VST)
Year-to-Date Return as of September 9: 92.3%
Vistra Corp. (NYSE:VST) is an American electricity and power generation company that focuses on related markets. The company could benefit from the rising use of generative AI, as increased AI activity will drive up energy demand. With the company investing in alternative energy sources, it is well-positioned to address these growing needs and become a more diversified energy stock. In March, Vistra Corp. (NYSE:VST) expanded its presence in nuclear energy by completing the acquisition of Energy Harbor. With a year-to-date return of over 92%, VST tops our list of the best unstoppable stocks that pay dividends.
Vistra Corp. (NYSE:VST) reported robust earnings for the latest quarter. Construction has begun on two new solar facilities: a 200 MW site supported by Amazon in Texas and a 405 MW site backed by Microsoft in Illinois. Additionally, pending the successful implementation of market reforms, appropriate market signals, and other conditions, the company plans to develop up to 2,000 MW of gas-fueled electric capacity in its home state to improve grid reliability for its customers. It reported revenues of $3.8 billion in Q2 2024, up from 20.5% from the same period last year.
Legacy Ridge Capital Management, LLC mentioned Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter. Here is what the firm has to say:
“One of the sectors we know well which had been out of favor for several years has quickly come into favor: Independent Power Producers (IPPs). We’ve written consistently about NRG and Vistra Corp. (NYSE:VST) since the 2019 letter, have owned each, or both, since 2018, and invested a meaningful amount of our assets in VST specifically the past few years. Nate and I intend on spending more time in the year-end letter on our updated views on the IPPs and our learnings from the on-going investment, but we were a bit surprised how quickly the narrative around these companies changed. Our Blue Sky 2030 estimates of intrinsic value converged with the share price 6-years before we thought probable. In the 2019 letter, with respect to VST, we wrote:
“Over the next decade management should have close to $15 Billion to deploy to share repurchases. If you assume they have to pay an average price for the stock that’s higher than the current one, and they can only repurchase 60% of shares outstanding instead of the 100% the math implies, FCF per share in 2030 would be $14. That’s a $70 stock at today’s valuation, but a $140 stock at a more reasonable FCF yield of 10%.” And… “The IPPs are un-investable for most money managers, so there we are. When they become investable we’ll probably be long gone.”
We’re not exactly long gone, but sentiment has certainly surpassed investable. After 5+ years of VST trading between $17 – $26 a share—and $26 exactly a year ago—it hit a high of $107 in May on the heels of the Artificial Intelligence (AI) narrative and the implications for electricity demand. While we agree with the prevailing consensus view that more Data Centers will be built, Data Centers require base load energy, and that the US will probably be short base load energy, predicting the rate of any technological advancement is not our area of expertise, and we feel the margin of safety has dissipated. Therefore, what had been our largest position entering 2023 and 2024, and has been our greatest contributor to performance, is now one of the smaller positions in the fund.”
On July 31, Vistra Corp. (NYSE:VST) declared a quarterly dividend of $0.2195 per share, hiking it by 0.9% from the previous quarter. This was the company’s 11th consecutive quarter of dividend growth. As of September 9, the stock has a dividend yield of 1.13%.
The number of hedge funds tracked by Insider Monkey owning stakes in Vistra Corp. (NYSE:VST) jumped significantly from 79 in the previous quarter, to 92 in Q2 2024. The total value of these stakes is more than $4 billion.
Overall, Vistra Corp. (NYSE:VST) ranks first on our list. While we acknowledge the potential for VST to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
