NextEra Energy (NEE) Pays Us in Q3-2016

A few weeks ago we received a nice chunk of cash from NextEra Energy (NEE) in the amount of $53.94 (87 cents X 62 shares). This represents a present yield of about 2.6% which is close to a 5-year low for NEE. This should hardly come as a surprise given that their share price has soared 28% in the past year which consequently drives the yield down. We would expect that NEE has a lower yield than the average utility since they have a much higher dividend growth track record than the average yield. Just look at the growth they’ve shown investors over the past 10 years:

Clean or renewable sources of energy are the direction we’re taking as a society, and in 2015 nearly all the power generated by NEE was from wind, solar, natural gas, and nuclear energy. The latest news for NEE is that they are acquiring bankrupt company “Energy Future Holdings” also known as EFH. Apparently EFH was subjected to the largest leveraged buyout in history back in 2007 by the notorious LBO firm KKR. Apparently they were gambling that the future price of natural gas would go up making their coal fired plants competitive. Unfortunately that plan backfired and EFH was left with $40 billion in debt and they had to declare bankruptcy in 2014. Now, NEE is stepping in and picking up some assets at presumably bargain basement prices though the amount they are putting forward is no small amount. Here are the details of the transaction:

As part of the transaction, NextEra Energy intends to fund $9.8 billion, primarily for the repayment of EFIH debt for an implied total enterprise value of $18.7 billion. Of that amount, it is expected that certain creditors will be paid primarily in cash with the remainder in NextEra Energy common stock.

It’s great to see some growth by acquisition and with a 50% payout ratio and a growing commitment from investors towards socially responsible investing, we’re fully expecting nothing but great things from NEE provided there are no black swan events.

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