This Utility's Dividend Growth Is Boring by Design. That's Exactly Why I Own It.

Long before the sector became a derivative play on the artificial intelligence (AI) trade, utility stocks were coveted by income-hungry, risk-averse investors. The thesis often attached to the sector is access to above-average yields and defensive traits with the potential for better long-term returns than high-grade bonds. Not to be overlooked is the sector's potential for payout growth.

Utility stocks account for 13.3% of the S&P High Yield Dividend Aristocrats® index, a gauge that includes only those members of the S&P Composite 1500 index that have raised dividends in at least 20 consecutive years.

This utility stock has quickly become a dependable dividend growth name. Image source: Getty Images.

Constellation Energy (NASDAQ: CEG) isn't there yet, but it's positioning itself to be a boring, dependable utility dividend raiser. Officially spun off from Exelon in February 2022, Constellation is young as a stand-alone publicly traded utility company, particularly among utility names. Youth isn't preventing the company from showing commitment to payout growth, and that's one of the reasons I like this stock.

Immediately following the Exelon separation, Constellation became not just a dividend payer but a dividend grower. From 2022 through 2025, the utility's annual payout nearly tripled.

Here's another reason I like this stock: Not only did Constellation boost its dividend by 10% last year, but it's also targeting the same level of growth this year. Call it boring or dependable, but either way, I'll take the clarity. I'll also happily take a dividend growth rate that far outpaces inflation, and these days, that's saying something.

Though not necessarily boring, Constellation's dividend trajectory has other favorable attributes. First, 2025 marked the fourth straight year in which the company's earnings topped the midpoint of its guidance range. That's a sign the earnings growth is there to support boring but consistent payout increases.

Second, Constellation is a utility with exposure to the AI power demand trade. A recently completed acquisition makes Constellation the largest U.S. provider of electricity, and its portfolio includes natural gas, nuclear, and renewables, making it a desirable partner for data center firms.

Todd Shriber owns shares of Constellation Energy. The Motley Fool has positions in and recommends Constellation Energy. The Motley Fool has a disclosure policy.