Dividend Growth Stock Overview: NextEra Energy

NextEra Energy's Florida Power & Light subsidiary serves much of Florida,
including Miami.
Photo: Freeimages.com/Megan Williamson

About NextEra Energy

NextEra Energy generates, distributes and sells electricity to customers in 27 states and Canada. The bulk of the company’s customers are in Florida, served by subsidiary Florida Power & Light Company. In addition to Florida Power & Light, NextEra Energy operates subsidiaries that generate renewable energy, provide electricity service to locations in Texas and New Hampshire, and sell fiber optic telecommunications services around the United States. NextEra Energy employs nearly 14,000 people and is headquartered in Juno Beach, Florida.

Nearly 5 million customers are served by Florida Power & Light, which has 25,100 megawatts (MW) of electrical generation capacity. Over 90% of the FPL’s capacity comes from natural gas and nuclear power. Based on 2014 figures (the latest year that’s available), over half of the operating revenues come from residential accounts and another 36% come from commercial accounts. While wholesale revenues account for only 3% of the total, as recently as 2012 wholesale revenues were negligible. NextEra Energy prides itself on using renewable power generation sources and its promotional materials tout this effort; however, FPL’s two solar generation facilities provide only 35 MW of capacity.

NextEra Energy’s other major subsidiary is NextEra Energy Capital Holdings, Inc., which owns NextEra Energy Resources (NEE Resources), and NextEra Energy Transmission, LLC (NEET).

NEE Resources is a wholesale generator of power and operates NextEra Energy’s competitive energy businesses (as opposed to its rate-regulated businesses). NEE Resources also conducts energy-related commodity marketing and trading activities to mitigate risks from fluctuations in energy prices. NEET owns and operates two subsidiaries, Lone Star and NHT, which provide rate regulated electricity service in parts of Texas and New Hampshire, respectively. NEET also owns FPL FiberNet, which leases internet network capacity to customers in Texas, New Hampshire and parts of the south-central United States.

In 2014, NextEra Energy posted total income of nearly $2.5 billion on revenues of $17.0 billion. 60% of the total income was provided by Florida Power & Light, with the remaining 40% coming from NEE Resources. Earnings per share were $5.60 in 2014; NextEra Energy recently reaffirmed full year 2015 earnings to the upper half of a range of $5.40 – $5.70, which translates into a year-over-year increase of between 1 – 2%. Based on the current dividend of $3.08, the company’s payout ratio is 56%. The company expects to compound EPS at 6 – 8% a year through 2018 and is projecting EPS of $5.85 – $6.35 in 2016 and $6.60 – $7.10 in 2017.

NextEra Energy has a share repurchase program that was authorized in February 2005 and reaffirmed in July 2011. The company’s repurchase activity is sporadic – the initial authorization in 2005 was for 20 million shares and over a decade the company has repurchased less than 7 million shares. As of December 2014, 13.3 million shares, representing 2.9% of the outstanding shares, remained on the program.

The company is a member of the S&P 500 index and trades under the ticker symbol NEE.

As a member of the S&P 500, once NextEra Energy has increased dividends for 25 consecutive years S&P will classify the company as an S&P Dividend Aristocrat. Given that NextEra has made a conscious effort to increase the dividend each year for 21 years straight, I expect them to continue to do so. This would put them on track to become a Dividend Aristocrat at the beginning of 2020.

NextEra Energy’s Dividend and Stock Split History

NextEra Energy Dividend History

NextEra Energy has compounded its dividend at 8% over the last decade.

NextEra Energy has paid dividends since at least 1983 and increased them since 1995. The company announces annual dividend increases in mid-February, with the stock going ex-dividend at the end of February. In February 2015 NextEra Energy announced a 6.2% dividend increase to an annualized rate of $3.08 per share. NextEra Energy should announce its 22nd consecutive annual dividend increase in February 2016.

Historically, NextEra Energy has increased dividends in the mid-single digits but over the last few years has increased the growth rate. Over the last 5 years NextEra Energy has compounded its dividend at 9.02%, while over the last 10 and 20 years the company has compounded the dividend at 8.05% and 6.46%, respectively.

NextEra Energy has split its stock twice. The splits, both 2-for-1, occurred in January 1985 and March 2005. A single share purchased prior to January 1985 would have split into 4 shares.

Over the 5 years ending on June 30, 2015, NextEra Energy stock appreciated at an annualized rate of 19.0%, from a split-adjusted $46.00 to $95.23. This outperformed the 15.0% compounded return of the S&P 500 index over the same period.

NextEra Energy’s Direct Purchase and Dividend Reinvestment Plans

NextEra Energy has both direct purchase and dividend reinvestment plans. You must already be an investor in NextEra Energy to participate in the plans; if you own the stock in your brokerage account, you’ll have to have it transferred into your name in order to join the plans. The minimum investment for additional direct purchases is $100, and the dividend reinvestment plan allows for full or partial reinvestment of dividends.

The plans’ fees structures are favorable for investors. Depending on the source of the shares purchased – and, unfortunately, you’ll have no control over that – you’ll pay a maximum of 3 cents per share purchased if they’re purchased off the open market; there’s no charge if the shares are purchased directly from NextEra Energy. When you sell your shares, you’ll pay a transaction fee of either $15 or $25 (depending on the type of sell order) plus a commission of 12 cents per share. You’ll also get charged an additional $15 if you go through a phone agent to sell your shares. All fees will be deducted from the sales proceeds.

Helpful Links

NextEra Energy’s Investor Relations Website

Current quote and financial summary for NextEra Energy (finviz.com)

Information on the direct purchase and dividend reinvestment plans for NextEra Energy

 

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