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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.

A Look At RSX Through The Prism Of Recent Events

Turkey shot down a Russian plane on the Syrian border. RSX was sold on the news. Does this enforce the bear thesis? The Market Vectors Russia ETF (NYSE: RSX ) has found itself under pressure when Turkey shot down a Russian jet on the Syrian border. Russia is not expected to take this matter lightly, as one of the two pilots was shot to death from the ground, and one of the marines who took part in the rescue mission also died. However, despite the fact that I have argued for an RSX bear thesis multiple times, I think this tragic incident will have limited consequences for the fund. Russia has multiple economic ties with Turkey, which increased after Russia became subject to sanctions after the developments in Ukraine. Russia exports gas to Turkey, and is also building the latter’s first nuclear plant. Last year, more than 4 million of Russian tourists went to Turkey for their holidays. In turn, Turkey supplies Russia with textile production and, increasingly, with food, including fruits and some meat. I won’t discuss any political ways of the supposed “Russian vengeance”, and will focus on the possible economic consequences of Russia’s actions for RSX. In my view, the only possible way to economically respond to Turkey’s actions without shooting itself in the leg is to ban the sale of vacation tours to Turkey. I see no way how both countries will end their energetic relationships without major damage to both sides. In fact, this touring ban has already come into being. The Russian Federal Agency for Tourism has already recommended that selling tour packages for Turkey be stopped. There is a possibility that the ban will last for a long time, as the Russian government has previously used any available chance to redirect Russian tourists from abroad to Crimea. Crimea lacks the necessary infrastructure and a culture of service following decades of underinvestment and, in my view, is uncompetitive compared to Turkey. Given all the recent problems that have hurt Crimea’s economics, there will be a massive incentive to help the disputed peninsula by redirecting tourists from Turkey to Crimea. This is pure speculation, of course, but I expect this to be implemented in reality. In this case, the damage will be limited to the economy of Turkey, which is beyond the scope of the current article, and the plans of Russian tourists, who have got accustomed to a certain level of service and will have to either decrease their appetites or put more money on the table. As for the fund’s holdings , I see no significant threats. The energy part of RSX could only benefit if increased tensions in the region finally lead to higher oil prices. I don’t think this will be the case, but the possibility of such an outcome certainly exists. Sberbank (OTCPK: OTCPK:SBRCY ) and Yandex (NASDAQ: YNDX ) have a presence in Turkey, but there are no signs that they will be harmed unless there is a very serious exchange of sanctions between the two countries. RSX fell on the news, but I think that it was just emotional overreaction. I remain concerned about the price of oil, the state of the Russian economy and the overvaluation of the Russian ruble, but I do not think this incident is a meaningful contribution to the bear thesis.

Why Income Investors Should Not Ignore Preferred Stock ETFs

Preferred stocks have been quite popular among income-seeking investors due to their juicy yields but many now wonder how these securities will perform in a rising rate scenario. We believe that there is still a case for investing in these securities. What are Preferred Stocks? Preferred stocks are hybrid securities that have characteristics of both debt and equity. They have a higher claim on assets and earnings than common stock. Preferred stocks are either perpetual (without any maturity date) or have long-term maturity (30 to 50 years). Like bonds, preferred stocks are usually rated by rating agencies. Most preferred dividends have the same tax advantage that the common stock dividends currently have. However, while companies have the obligation to pay interest on the bonds that they issue, dividends on preferred stock can be suspended or deferred by the vote of the board. Why Should You Invest in Preferred Stocks? Juicy yields around 5-6% are the main attraction for investors. Further, preferred stocks have low correlations with common stocks and hence add diversification to a stock-centric portfolio. Further, these securities have much lower volatility than stocks and provide stability to portfolios. Risks Like bonds, preferred securities are sensitive to changes in the interest rates. In the event of rising interest rate, the value of these securities will fall. But I believe that in the current scenario, when interest rates are expected to stay “lower for longer,” the impact will be minimal. Preferred securities also face credit risk as the issuer may not be able to meet the claims of investors. However, both the ETFs that we have discussed below have minimal exposure to energy sector, where chances of default are higher. Many preferred securities have call provision, i.e. the issuer has the right to redeem its preferred stock or convert it to common stock, but call is usually exercised by issuers when interest rates are falling. ETFs to Consider iShares S&P U.S. Preferred Stock Index (NYSEARCA: PFF ) is the most popular and liquid preferred stock ETF in the space. It has a lot of exposure to banks and other financials, which are expected to do well in rising rate scenario. PowerShares Variable Rate Preferred Portfolio Fund (NYSEARCA: VRP ) holds variable- and floating-rate preferred stocks which reduces interest rate risk. Thus, VRP could be a nice option for income-seeking investors in the rising rate scenario. To learn more, please watch the short video below: Original Post