Tag Archives: dividend

Dividend Growth Stock Overview: NextEra Energy

About NextEra Energy NextEra Energy (NYSE: NEE ) generates, distributes and sells electricity to customers in 27 states and Canada. The bulk of the company’s customers are in Florida, served by its 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. The company 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 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, wholesale revenues were negligible as recently as 2012. 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. The company’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). It also conducts energy-related commodity marketing and trading activities to mitigate risks from fluctuations in energy prices. NEET owns and operates two subsidiaries of its own, 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 in the upper half of a range of $5.40-5.70, which translates into a year-over-year increase of between 1% and 2%. Based on the current dividend of $3.08, the company’s payout ratio is 56%. It 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. Its 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 its dividend each year for 21 years straight, I expect the company to continue to do so. This would put it on track to become a Dividend Aristocrat at the beginning of 2020. NextEra Energy’s Dividend and Stock Split History (click to enlarge) NextEra Energy has compounded its dividend at 8% over the last decade. It has paid dividends since at least 1983, and has 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. The company 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 past few years, it has increased the growth rate. Over the last 5 years, it has compounded its dividend at 9.02%, while over the past 10 and 20 years, the company has compounded the dividend at 8.05% and 6.46%, respectively. The company 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 The company 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 Disclosure: I do not currently have, nor do I plan to take positions in NEE.

I’m Keeping A Close Eye On The PowerShares S&P 500 High Dividend Low Volatility ETF

SPHD has yield of around 3.5%. Investors seeking low volatility and dividends should consider the fund. The fund makes distributions monthly. Recently I’ve been looking through numerous dividend focused ETFs to decide which one(s) I would be happy to add to my portfolio. In general, there are a lot of funds that focus on dividends and a lot to like about most of them. However, there are a few specific funds in this space that I like personally. One of these is the PowerShares S&P 500 High Dividend Low Volatility Portfolio ETF (NYSEARCA: SPHD ). The fund tracks the S&P 500 Low Volatility High Dividend Index, which is comprised of 50 of the least-volatile high dividend-yielding stocks in the S&P 500. This makes the funds portfolio fairly distinct compared with some of the other typical higher dividend funds. It is rebalanced twice a year, and distributions are paid to holders on a monthly basis. The expense ratio is 0.30%, which isn’t necessarily low, but isn’t necessarily too high either. The current 12 month distribution rate (yield) is 3.49%. So the real question to answer is, what is the appeal of this fund? Of course the upfront appeal would be the dividends and higher yield. Getting down to what I’m looking for, the appeal to me is how boring this investment is. By boring I’m talking about the consistent distributions and low volatility. At this point you might be thinking about the dozens of other investments that have both of these characteristics. I’m not about to say that there are not plenty of others out there. Sticking with the equity side of investments one such example might be AT&T (NYSE: T ) (AT&T is the 10th largest holding for the fund). However, the fund offers a totally different element; diversification. Diversification is obviously something all investors want in their portfolios, and this would be one of the key reasons behind my consideration of dividend ETFs. It’s pretty easy to see what makes this ETF boring by just glancing at the holdings. Utilities and financials make up a significant portion of the holdings. Upon closer look a majority of the financials are REITs, though. Both the utilities and REITs are obviously a key to what makes this a higher yielding fund. Getting even more specific into why the fund is boring, other than the low volatility, we can see that a lot of these companies, especially these utilities and REITs, have steady and simple reoccurring income (in some cases regulated). This makes a good portion of the holdings defensive in nature and in turn quite boring. This is where the near-term outlook gets a little more complicated. Keeping in mind that a large portion of the holdings are utilities and REITs things may get a little less boring heading into December. If the Fed raises rates these holdings in particular may be effected negatively to some degree making the value of the fund drop. This may present a better opportunity for investors and more than likely a slightly higher yield. Considering part of my long-term strategy is to grow my portfolio utilizing dividends, I believe the fund connects well with my goals. The fact that distributions are made on a monthly basis is also an added plus for my strategy as I choose other investments to add to my portfolio on a regular basis. In conclusion, I find the PowerShares S&P 500 High Dividend Low Volatility Portfolio ETF to be boring in a good way. While it may not be for all investors, those seeking things such as easy security and diversification should consider it. With what seems to be a Fed rate hike finally coming, I believe it would probably be best to wait and see how the more sensitive holdings react to the actual hike before considering the fund currently. I will be keeping a close eye on the fund for now.

Buy Dominion Resources For A Nice Dividend And High Analyst Price Targets

Merrill Lynch has a price target 17% above current price of $67.9. Analysts are getting generally more positive on utilities after a year of relative underperformance. The company is one of the safest investments in the market right now. In his now legendary book, The Intelligent Investor, Benjamin Graham writes that the goal of a conservative investor is to look for investments that are likely to provide safety of principle and an adequate return. His disciple, Warren Buffett has put it slightly differently saying, “The first rule of investing is don’t lose money. The second rule is don’t forget the first rule.” Utility companies in general are a good place to look for this type of conservative investment, and it doesn’t get any safer than Dominion Resources, Inc. (NYSE: D ). D is one of the nation’s largest utilities with a market cap of over $40 billion and rock solid fundamentals. In addition to the company’s great fundamentals is the fact that analysts are lining up with price targets higher than the current price across the board. Merrill Lynch recently set a price target of $80 a share. While this is one of the higher targets, the mean target among a relatively large sample of 17 brokers isn’t far off at $78. Both of these figures provide generous upside to the stock, especially for a utility company that usually trades within a tight range. Research firm Guggenhiem also rates the stock a “buy”. D recently posted quarterly YoY earnings growth of 12% with a profit margin of almost 15%. This is a much higher margin than the industry average of 8-10%. With a forward P/E of 17, the company looks fairly valued. While 17 is slightly higher than average for a utilities company, in this case the higher multiple reflects the high quality of the company. As mentioned above, there aren’t very many utility companies that have 12% margins are growing the bottom line by 15%. This helps to make the 3.7% dividend sustainable. The company’s ROE of 14.54% is also quite strong for a utilities company, so it appears as if D is outperforming the industry pretty much across the board. As if all of the above weren’t enough to convince the conservative investor in the value of D as a safe long term bet, the stock has been picked as a top dividend stock by the Dividend Channel’s “DividendRank” report . The lowest the stock has traded in the last 52 weeks is $64 a share, which is only $4 below the current price, which is a technical indicator that points to short term upside. So by almost any measurement the stock is either fairly valued or undervalued. I rank the stock a strong “buy” for the investor looking for long term safety of principle and an adequate return. And of course we can collect the nice dividend while we wait.