NextEra Energy: Power Your Income Portfolio With Green Energy

Key Points

• NextEra Energy Partners had a solid quarter and guided for another 2 years of robust dividend growth. 
• Analysts are supporting the stock and see it moving higher this year. 
• Institutional activity surged in Q3 and may help catalyze a rally. 

NextEra Energy Inc. NYSE: NEE is 1 of the world’s leading renewable energy producers, and it can electrify an income portfolio. The company has demonstrated an ability to grow its capacity, revenue base, and earnings while supporting healthy dividend growth that it is committed to continue.

Among the many takeaways from the Q2 report are the above-average dividend increase in 2023 and the expectation for 10%+ dividend increases to continue for at least the next 2 years. That alone is worth investor attention because NextEra Energy Partners is the best-positioned company to grow its dividend in the electric utility and power generation sector. 

The electric utility and power generating sector is well-known for its dividend quality, so it is saying something to call NextEra Energy the best-positioned stock in the group. Where average utility companies may pay a higher yield, they also pay a larger percentage of earnings and are growing their distributions much slower.

NextEra Energy pays only 55% of its earnings and has been growing the distribution at a +10% CAGR compared to low-single-digits for competitors. That should help support the stock over the next few years. As it is, the company has increased its distribution for 27 consecutive years and is a stable 2.5% yielding payment. 

Institutions And Analysts See Upside For NextEra Energy 

The institutional and analyst activity in NextEra Energy is favorable to higher share prices. The 11 analysts rating the stock have it pegged at Moderate Buy with a price target about 20% above the pre-release action. Marketbeat.com didn’t pick up any new revisions immediately after the release, but the trend in sentiment is bullish.

The Moderate Buy rating has been firm for the last year, while the price target, down YOY, is trending higher compared to last quarter and last month. If this continues, the market should follow the analysts higher. 

Institutional activity is more bullish. The institutions own nearly 80% of the stock, and they took a big bit in the first month of Q3 2023. Net activity for the last 12 months is over $100 billion, with nearly $100 billion gained in Q3.

The activity shows numerous purchases by a broad array of domestic and international investment firms, with many making purchases in the $100 million or greater category. This activity is consistent with a bottom in the market and a potential turning point for the stock price. 

NextEra Outperforms; Maintains Guidance 

NextEra had a solid quarter, with revenue and earnings outperforming in all segments. The company reported $7.35 billion in net revenue for a gain of 41.9% compared to last year. The revenue beat the consensus by 2000 basis points, but the results may not be directly comparable.

On the bottom line, the adjusted earnings grew by 8.6% compared to last year, supporting the dividend outlook and outperforming by 730 basis points. The guidance is favorable but does not reflect the Q2 strength. The company reaffirmed its outlook for 2023 and 2024, assuming 9% EPS growth next year. The backlog was also improved to replace capacity put into service this year. 

The chart is mixed but shows solid support at the bottom of a trading range. Critical support is near $72, where it has repeatedly confirmed support over the past year. The price action may retest this level before moving appreciably higher, but support will not be guaranteed.

If the market falls through $72, it could continue to the $68 level or lower. If support is reconfirmed at $72 or higher, this stock could begin to rebound. The critical resistance is the 150-day EMA near $76 which has provided resistance in 2023. A bullish move above would open the door to a sustainable rally.