NextEra Energy (NEE) Stock Looks Fairly Priced As Merger Approval Looms Large
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NextEra Energy has delivered a 31.1% share price gain over the past three years, and the stock now sits at a level where investors are asking whether the current price is still supported by the dividend stream that underpins many utility valuations. That 31.1% return over three years puts real weight on the question of whether the income NextEra Energy pays out can justify where the shares trade today. The approved US$66.8b all stock merger with Dominion Energy may reshape future cash flows, capital needs and payout capacity as the combined utility platform is built out over several years. If you'd rather focus on earnings, this one's for you. See why NextEra Energy's 18.2x P/E tells a different valuation story. The issue now is whether the dividends investors can reasonably expect from NextEra Energy are enough to support the current share price when viewed through its dividend stream alone. If you are weighing NextEra Energy against other dividend focused utilities, it can help to compare it with companies in our 6 dividend fortresses The Dividend Discount Model (DDM) looks at what you pay today against the stream of dividends you might collect over time. For NextEra Energy, the inputs assume recent dividends per share of about $2.70, a payout ratio near 59%, and a long term dividend growth rate capped at 3.7%. That combination points to a utility that is already...
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