NEE, DUK, SO, and D: Largest Utilities’ Dividend Outlook



Dividend outlook

Although Southern Company (SO) and Duke Energy (DUK) have relatively higher yields, their dividend per share growth rate is much lower than their large-cap peers. Dominion Energy (D) and NextEra Energy’s (NEE) stronger earnings growth potential could facilitate their dividend growth, which makes them stand out among the top four utilities.

Southern Company and Duke Energy are two pure-play regulated utilities, while Dominion and NextEra Energy have relatively larger exposure to competitive operations.


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Total returns

NextEra Energy’s total returns in the last five years came in at 19%, compounded annually. Duke Energy returned ~8% during the same period. Dominion Energy returned 12%, while Southern Company returned 6%, compounded annually, in the last five years.

In comparison, the Utilities Select Sector SPDR ETF (XLU) returned 12% and the SPDR S&P 500 (SPX-INDEX) (SPY) returned 16%, compounded annually, in the last five years.

We considered the dividend gain and stock appreciation to calculate the total returns.

NextEra Energy’s better-than-expected earnings in the last few years fuelled its stock price movement. In 2017, it rose more than 30% and outperformed its peers by a huge margin.

Dominion Energy has strong growth prospects going forward due to its recent purchase of SCANA (SCG). Southern Company’s power plant woes influenced its market performance last year. Despite having a healthy dividend profile, Southern Company lagged its peers in terms of total returns.

NextEra Energy’s higher earnings growth rate in the last decade powered its dividend growth, which makes it stand tall among its peers.

To learn more, read How the Largest S&P 500 Utilities Are Placed ahead of 2018.


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