NextEra Energy: Dividends
Renewables giant NextEra Energy (NEE) is one of the fastest-growing utilities in the US. Last year, NextEra increased its dividends by 13% compared to dividends paid in 2015. The company generally declares dividends in February each year. So what can investors expect from NextEra Energy in 2017?
Though NextEra Energy’s earnings growth is one of the fastest in the industry, its dividend yield is among the lowest compared to peers. Currently, the company is trading at a dividend yield of near 3%, while the Utilities Select Sector SPDR (XLU) yields around 3.5%. Peers Duke Energy (DUK) and Southern Company (SO) are currently trading at a dividend yield near 4.5%.
Why NextEra Energy yields lower than peers
NextEra Energy’s heavy capital spending could be one of the main reasons behind its lower yield. While many utilities pay more than 75% of total earnings in dividends, NextEra Energy pays out only 53%. Its dividend payout ratio has historically been very low relative to peers.
On a positive note, NextEra Energy’s dividends growth in the near future is expected to follow its earnings growth. That means its dividends might grow ~10% in the next few years, way above the utilities’ average expected dividend growth rate.
NextEra Energy’s expected above-average earnings growth seems achievable in the future considering its Oncor acquisition and continued strong performance in the last several years.
We’ll look at factors affecting NextEra’s dividends in detail in the later parts of the series.