Dividend stocks can be an excellent way to earn passive income. If you’ve been looking into these stocks, you’ve likely run across NextEra Energy Partners (NYSE: NEP). This green energy company is currently paying a stunning yield of about 13%, dwarfing the average yield on the S&P 500. But is this monster payout sustainable? Or is it too good to be true?
Who Is NextEra?
NextEra is the world’s largest renewable solar and wind energy provider. It’s also a leader in battery storage for renewable energy. The future looks bright for NextEra, as the company has recently signed deals with massive companies such as Google to help meet the growing demand for power in the AI era.
Smooth Sailing or Choppy Seas?
NextEra’s current dividend yields are shockingly high, but there is no reason to believe that they will slip anytime soon. For the second quarter of 2024, the company generated $560 million in adjusted earnings, which represents an annual increase of more than 15%. It’s been heavily investing in acquisitions, but now believes that it can generate enough power to meet its obligations without another acquisition in the immediate future. It’s also committed to continuing to grow its dividend yields over time, setting an ambitious but achievable target of 6% dividend growth per year. With nearly 1.1 GW of wind power projects already committed out of 1.3 GW needed by 2026 to meet its organic growth plan, NextEra appears to be right on track.
However, some analysts are not so sure. Right now, the company is focused on reducing its cost of capital. Some of this will be achieved through the selloff of its remaining natural gas pipeline assets, which will allow the company to buy out much of the convertible equity portfolio financing it used for previous acquisitions. However, with a dividend yield this high and overriding cost of capital concerns, some worry that suspending or reducing dividend payouts could become an attractive option for NextEra.
Only time will tell whether the company remains committed to dividend payout growth or decides to use some of that money to meet its financial priorities. Investors would be smart to be wary, but so far there are no concrete indications that NextEra intends to change its dividend growth plan.
Neither Lisa Fritscher nor Stocks.News have positions in this company.
Did you find this insightful?
Bad
Just Okay
Amazing
Disclaimer: Information provided is for informational purposes only, not investment advice. We do not recommend buying or selling stocks. Stock price discussions are based on publicly available data. Readers should conduct their own research or consult a financial advisor before investing. Owners of this site have current positions in stocks mentioned thru out the site, Please Read Full Disclaimer for details Here https://app.stocks.news/page/disclaimer
Contributing Writer
Lisa Fritscher has been a contributing writer for App.Stock.News since 2024. Lisa has been interested in investing since winning The Stock Market Game in high school. In more than a decade as a professional writer, she has written consumer-facing financial information and advice articles for a wide variety of publications. She has a Bachelor of Arts in Psychology from the University of South Flori...