NextEra Energy (NYSE: NEE) is the largest electric utility and energy infrastructure company in North America.
Full disclosure: I’ve owned the stock for a very long time, having reinvested the rising dividend for years.
But can I and other shareholders rely on NextEra to continue to grow its dividend?
Last year, the company generated $3.2 billion in free cash flow. That was about a third less than the prior year.
There were several reasons for that. The company made a little more money in 2024, deferred income taxes were higher (which adds to cash flow), and capital expenditures were lower.
Regardless of the cause, the Safety Net model penalizes companies for declining cash flow.
This year, free cash flow is forecast to rise to $3.5 billion.
But here’s where things get a little dicey.
NextEra paid shareholders $4.7 billion in dividends in 2025 and is forecast to pay $5 billion this year. Both figures exceed the respective free cash flow totals for the year.
When a company pays more in dividends than it generates in cash, that means it has to get the money either from cash on hand or by borrowing. Neither is a great situation.
NextEra Energy currently pays a quarterly dividend of $0.6232 per share, which comes out to a 2.9% annual yield. Management said it expects to boost the dividend by 6% per year through 2028. It raised the dividend by 10% in February.
Importantly, NextEra is a Perpetual Dividend Raiser. It has lifted its dividend every year for 32 years.
We have an interesting situation: A company with a phenomenal track record of raising its dividend has publicly committed to continue increasing the dividend for at least the next two years… but doesn’t generate enough cash to pay it.
It does have $2.9 billion in cash, but it also has over $100 billion in debt, including more than $5 billion that comes due in the next 12 months.
However, the utility giant should have no problem rolling its debt to new loans or notes. It has an A- credit rating, and it’s not like its customers can just decide to switch to a different electricity provider.
I don’t doubt that management can find the money to continue to raise the dividend. After three decades of dividend raises and numerous public statements that the streak will continue, if the dividend were not raised, the stock would likely get hammered, and management would have a dumpster fire on their hands trying to explain to Wall Street why they are ending the streak.
Management has said the dividend will grow for the next two years, and I believe them.
But the numbers say there is some risk of the dividend being cut.
Dividend Safety Rating: C
Next week, I’m going to take a look at the dividend safety of a stock in the financial sector.
Which financial stock would you like me to analyze? Leave the ticker symbol in the comments section.
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