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NextEra Energy’s Total Returns and Payout Ratio Compared to Peers

Vineet Kulkarni - Author
By

Aug. 18 2020, Updated 4:40 a.m. ET

Total returns

NextEra Energy (NEE), the biggest constituent of the Utilities Select Sector SPDR ETF (XLU), significantly outperformed its peers in the last few years. It returned more than 17% in the last year, while in the last five years, it returned 18% compounded annually.

Total returns consider both capital appreciation and dividend payments in a particular period. NextEra Energy’s outperformance is the result of its steep stock performance and superior dividend growth. Its peers Duke Energy (DUK), Southern Company (SO), and Dominion Energy (D) notably underperformed NextEra Energy in the periods under consideration.

The Utilities Select Sector SPDR ETF (XLU) returned 1% in the last year and 11% compounded annually in the last five years. Total returns from the broader markets came in at 14% compounded annually in the last five years.

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Payout ratio

NextEra Energy’s payout ratio was 52% in the last 12 months, which was lower than the industry average of 65%–75%. The payout ratio represents the portion of a company’s profits distributed to shareholders through dividends.

Regulated utility giants Southern Company (SO) and Duke Energy (DUK) have payout ratios of 76% and 83%, respectively, for the last 12 months.

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