NextEra Energy Delivers Two Decades of Annual Dividend Boosts, Yield Outperforms Industry Averages (NYSE:NEE)
By: Ned Piplovic,
NextEra Energy, Inc. (NYSE:NEE) is a Florida-based utility company that has continued rewarding shareholders with a balanced combination of reliable dividend income and a steadily rising share price.
The company’s streak of consecutive annual dividend boosts stretches back more than two decades. In addition to more than 20 years of consecutive annual dividend boosts, NextEra also rewarded shareholders with a decade of nearly uninterrupted share price growth. Just over the past year, the share price rose nearly 27%. Combined with the dividend distributions, shareholders received a total return of almost 30% over the trailing 12 months and more than doubled their investment over the past five years.
As always, interested investors should conduct their own stock analysis and due diligence to confirm the equity’s growth potential and compatibility with their own portfolio strategies and goals. However, investors who determine that the NextEra stock might have worthy growth potential should move quickly. The company’s next ex-dividend date is approaching quickly on August 28, 2019. Investors who wish to lock in eligibility to receive the next round of dividend distribution on the September 16, 2019, pay date must claim stock ownership at least one day before the ex-dividend date.
NextEra Energy, Inc. (NYSE:NEE)
Headquartered in Juno Beach, Florida, and founded in 1984, NextEra Energy, Inc. generates electric power and distributes electricity to residential and commercial customers primarily in Florida. Based on more than 46,000 MW of generating capacity with electric generation facilities located in 30 U.S. states and four Canadian provinces, NEE is one of the largest electric power companies in North America. The company operates through two main subsidiaries — Florida Power & Light Company (FPL) and NextEra Energy Resources (NEER). FPL provides electricity distribution to more than 5.5 million residential and commercial customer accounts and 10 million people across almost half the state of Florida.
Through its NEER subsidiary and its affiliated entities, NextEra Energy is the largest generator of renewable energy from the wind and sun in the world based on Megawatt hours (MWh) produced. Representing approximately 6% of U.S. nuclear power electric generating capacity, the company had one of the largest arrays of nuclear power stations in the United States, with eight reactors at five sites located in Florida, New Hampshire, Iowa and Wisconsin. NEER’s assets accounted for approximately 11% of the installed base of universal solar power production and about 16% of the installed base of wind power production capacity in the United States.
The company’s current $1.25 quarterly dividend represents a 12.6% year-over-year increase compared to the $1.11 dividend amount paid in the same period last year. This new $1.25 quarterly distribution corresponds to a $5.00 annualized dividend amount and a 2.28% forward dividend yield at current share price levels. The company’s share price advancement over the last several years suppressed the dividend yield, which is currently 8% lower than the company’s own 2.48% average yield over the last five years.
However, while the rapid capital gains reduced NextEra’s dividend yield, the company’s current yield is still above the 1.96% yield average for overall markets, as well as substantially higher than the average yields of NextEra’s industry peers. Compared to the 2% simple average dividend yield of the entire Utilities sector, NextEra’s current 2.28% dividend yield is more than 14% higher. Additionally, the current yield also outperformed the 2.08% yield average of NextEra’s peers in the Electric Utility industry segment by almost 10%.
The company initiated dividend distributions in 1990 and has boosted its annual dividend distribution amount every year since 1997. Over the past two decades, the annual dividend payout amount rose nearly five-fold. That advancement pace is equivalent to an average growth rate of 8.2% per year. Dividend advancement even accelerated in the more recent years. The five-year average annual growth rate is 11.3% and the growth rate over the past three years is even higher at nearly 13%.
NextEra’s current 68% dividend payout ratio indicates that the company uses more than two-thirds of its earnings to cover dividend distributions. Additionally, the current ratio is also more than 40% higher than the company’s 48% average payout ratio over the last five years. Investors generally consider 50% to be the upper limit of the sustainable payout ratio range. However, that limit varies from sector to sector.
The Utilities sector can sustain higher payout ratios without a significant danger of dividend cuts. However, those high payout ratios can not sustain for extended periods. Therefore, interested investors should watch the payout ratio over the next few periods to determine whether the currently high ratio is just a temporary spike or whether it is a serious reason for concern.
In addition to the rising dividend distribution payouts, NextEra also rewarded its shareholders with stable asset appreciation and minimal volatility over the past several years. These capital gains combined with the dividend income for robust total returns. Just over the past 12 months, the dividend income supported a share price gain of nearly 27% for a total return on shareholders’ investment of nearly 30%.
Longer-term total returns were even higher. The combined benefit of NextEra’s increasing share price and the expanding dividend income distributions rewarded the shareholders with a total return on investment of more than 85% during the last three years. Furthermore, the shareholders more than doubled their investment by a wide margin over the last five years with a total return of almost 145%.
Dividend increases and dividend decreases, new dividend announcements, dividend suspensions and other dividend changes occur daily. To make sure you don’t miss any important announcements, sign up for our E-mail Alerts. Let us do the hard work of gathering the data and sending the relevant information directly to your inbox.
In addition to E-mail Alerts, you will have access to our powerful dividend research tools. Take a quick video tour of the tools suite.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.