At the end of September, one of my favorite energy dividend stocks announced a whopping 50% cut to their forecast dividend growth rate.
Unsurprisingly, the stock tanked by almost 60% over the next few weeks. But look beyond the headlines, and this dividend “disaster” is actually a huge opportunity. I’m talking a double or even triple. Not to mention the dividends you get while you wait. Let me explain…
NextEra Energy Partners (NEP) is a “yieldco” type of company that owns renewable energy production assets with the output sold on long-term contracts. NEP has been a high dividend growth rate stock. Since its July 2014 IPO, the dividend has increased every quarter, producing almost 15% compound payout growth. With its second-quarter earnings release, the company reiterated its forecast of 12% to 15% distribution growth through 2026.
Large-cap ($140 billion market cap) public utility NextEra Energy (NEE) is the sponsor company of NextEra Energy Partners. As the sponsor, NEE develops or acquires renewable energy assets, which are then sold to NEP at prices that allow the NEP dividend rate to continue growing. NextEra Energy had been highly supportive of NextEra Energy Partners’ investors and the company’s prospects to sustain its dividend growth goals.
On September 27, NextEra Energy presented at the Wolfe Research Utilities, Midstream & Clean Energy Conference. The presentation slides show the changes planned for the NEP business and dividends…
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