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NextEra Energy's Dividend Profile Is Smart despite Lower Yield

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NextEra Energy's Dividend Profile Is Smart despite Lower Yield PART 1 OF 4

Analyzing NextEra Energy’s Dividend Yield

NextEra Energy’s dividends

Renewables giant NextEra Energy (NEE) outperformed its peers. The stock displayed an epic rise in the last few years. The largest utility by market capitalization gave healthy returns due to its stock appreciation and strong dividends.

In 1Q17, NextEra Energy paid dividends of $0.98 per share, which implies annualized dividends of $3.93 per share. Its dividends rose 13% compared to 4Q16.

Analyzing NextEra Energy’s Dividend Yield

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Dividend yield

NextEra Energy’s annual earnings growth of ~8% is one of the fastest in the industry. However, its dividend yield is among the lowest compared to its peers. Currently, the company is trading at a dividend yield of 2.9%, while the Utilities Select Sector SPDR (XLU) yields ~3.3%.

NextEra Energy’s heavy capital spending could be one of the main reasons behind its lower yield. Peers Duke Energy (DUK) and Southern Company (SO) are trading at dividend yields near 4.1% and 4.6%, respectively. Dominion Resources’s (D) yield is near 3.9%.

Among its peers, NextEra Energy’s dividends grew remarkably in the last few years due to strong earnings growth. In the last five years, its dividends grew 9.6% compounded annually. On the other hand, the industry average was near 4%. According to analysts’ estimates, NextEra Energy’s dividends are expected to increase more than 10% due to its strong earnings growth for the next few years.

In the next part, we’ll look at factors impacting NextEra Energy’s dividends.

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