Superior dividend growth

NextEra Energy’s (NEE) dividend profile looks attractive predominantly due to its premium dividend growth despite its lower yield. The company has increased its dividend by 11% compounded annually in the last five years. Broader utilities (XLU) have managed to grow their dividends ~4% compounded annually in the same period.

Comparing the Dividend Growths of the Top Utility Stocks

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SO and DUK lag dividend growth

NextEra Energy is aiming for even higher dividend growth of 12%–14% per year for the next few years. NextEra Energy’s relatively high dividend growth has been primarily driven by its higher earnings growth. The company has increased its EPS by more than 8% compounded annually over the past five years—double the industry average. Utilities (XLU) at large are expected to increase their dividends by ~4% going forward.

Southern Company’s (SO) dividend yield is higher than the yield of utilities at large, but it lags its peers in terms of dividend growth. Southern Company’s dividend per share has increased 3.4% compounded annually in the last five years.

Dominion Energy (D) also stands tall in terms of dividend growth. It has increased its dividend by ~8% compounded annually in the same period. Dominion Energy’s earnings will likely stabilize further considering its increased regulated operations after its SCANA acquisition. Duke Energy’s (DUK) five-year dividend growth rate is 3.3%. Southern Company and Duke Energy aim for dividend growth in line with the industry average.

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