NextEra Energy Partners LP's Dividend Analysis
Assessing the Sustainability of NEP's Dividend Payments
NextEra Energy Partners LP(NYSE:NEP) recently announced a dividend of $0.88 per share, payable on 2024-02-14, with the ex-dividend date set for 2024-02-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into NextEra Energy Partners LPs dividend performance and assess its sustainability.
What Does NextEra Energy Partners LP Do?
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NextEra Energy Partners LP is formed to acquire, manage and own contracted clean energy projects. It owns interests in wind and solar projects in North America, as well as natural gas infrastructure assets in Texas. The renewable energy projects are fully contracted, use industry technology and are in regions that are favorable for generating energy from the wind and sun. Its natural gas pipelines in the portfolio are all strategically located, serving power producers and municipalities in South Texas, processing plants and producers in the Eagle Ford Shale, and commercial and industrial customers in the Houston area. Renewable energy sales generate maximum revenue for the company.
A Glimpse at NextEra Energy Partners LP's Dividend History
NextEra Energy Partners LP has maintained a consistent dividend payment record since 2014. Dividends are currently distributed on a quarterly basis.
NextEra Energy Partners LP has increased its dividend each year since 2014. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 10 years.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down NextEra Energy Partners LP's Dividend Yield and Growth
As of today, NextEra Energy Partners LP currently has a 12-month trailing dividend yield of 11.14% and a 12-month forward dividend yield of 11.37%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, NextEra Energy Partners LP's annual dividend growth rate was 14.30%. Extended to a five-year horizon, this rate increased to 14.70% per year.
Based on NextEra Energy Partners LP's dividend yield and five-year growth rate, the 5-year yield on cost of NextEra Energy Partners LP stock as of today is approximately 22.12%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, NextEra Energy Partners LP's dividend payout ratio is 5.82. And this may suggest that the company's dividend may not be sustainable.
NextEra Energy Partners LP's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks NextEra Energy Partners LP's profitability 6 out of 10 as of 2023-12-31, suggesting fair profitability. The company has reported net profit in 7 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. NextEra Energy Partners LP's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and NextEra Energy Partners LP's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. NextEra Energy Partners LP's revenue has increased by approximately -4.20% per year on average, a rate that underperforms than approximately 79.73% of global competitors.
Concluding Thoughts on NextEra Energy Partners LP's Dividend Profile
In conclusion, NextEra Energy Partners LP's dividend history reflects a strong commitment to returning value to shareholders through consistent and growing dividend payments. While the high dividend yield and growth rates are attractive, the sustainability of these dividends could be a point of concern due to the payout ratio and the company's profitability metrics. Investors considering NEP for its dividend potential should also weigh these factors and monitor the company's ability to maintain its dividend growth trajectory in the context of its overall financial health and industry trends. As always, it's advisable to conduct thorough research or consult with financial advisors before making investment decisions.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
