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NextEra Energy’s Dividend Outlook and Growth Prospects

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Dividend outlook

While NextEra Energy’s (NEE) earnings increased more than 8.0% compounded annually in the last decade, its peers’ average earnings growth stood at ~5.0%. Higher earnings growth facilitated NextEra Energy’s higher dividend growth.

Because of its substantially larger renewables portfolio, a healthy mix of competitive and regulated operations, as well as a territorial monopoly in Florida—the fourth-most-populous state, NextEra Energy previously achieved higher earnings growth.

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NextEra Energy’s higher earnings drove its stock in the last few years. With stronger market performance and healthier dividend growth, NextEra Energy’s total returns significantly outperformed its peers.

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Total returns

In the last one-year period, NEE’s total returns came in at 27.0%. The broader utilities (XLU)(IDU)(VPU) returned 5.0% in the same period. NEE’s total returns in the last five years came in at 19.0% compounded annually. The broader utilities returned 10.0% compounded annually in the same period.

NextEra Energy outperformed not only its peers but also the broader market in terms of total returns in the last one-year, five-year, and ten-year timeframes. Total return considers stock appreciation as well as dividends paid in a particular period.

What’s ahead for NextEra Energy?

With ~$44.0 billion of planned capital investments, NextEra Energy’s management aims to grow its per-share earnings by 7.0% per year through 2021. This is higher than the industry average of ~5.0%. As NEE’s principal market, Florida’s population growth is faster than the nation’s average annual growth rate of ~1.6%. This differential could drive the utility’s earnings growth.

After their two-month-long span of weakness, utilities have demonstrated some recent signs of recovery. For more information, please read S&P 500 Utilities at a 52-Week Low Offer a Big Gain Potential.

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