The stock market is at the moment not really sure where it wants to go. Despite all the negative news, a negative day is normally followed by a positive one. Besides my investment in MO, I will also stay on the sideline for a while and will concentrate on collecting the cash, since I am expecting a further downturn in the coming months. Unfortunately, this Covid-19 disaster is not over at all. Economically we are at the starting point of a historically very bad situation and this might last up to year. Nevertheless, I will now once per week introduce you to stocks which are very good candidates for being dividend aristocrats.

Overview

NextEra Energy (NEE) engages in the generation, transmission, distribution, and sale of electric energy in Florida. It produces electricity from natural gas, wind, nuclear, oil, hydro, solar, and other resources. As of December 31, 2009, the company served approximately 4.5 million residential, commercial, and industrial customers in the east and lower west coasts of Florida. FPL Group also leases wholesale fiber-optic network capacity and dark fiber to telephone, wireless carriers, Internet, and other telecommunications companies. The company was formerly known as FPL Group, Inc., and changed its name to NextEra Energy, Inc. in May 2010. The company was founded in 1984 and is based in Juno Beach, Florida.

Stock Data

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Dividend Data

NEE has increased its dividend for now 10 years. This is already a very good streak of dividend increases and the latest increase was 12% so the company is able to deliver a very good growth rate.

Dividend: Currently the company pays a yearly dividend of 1.76 USD, which equals a yield of 3.33%. The latest dividend increase was at 10.0%, which is quite above my goal of having a yearly increase of 7.5%.

Payout Ratio: The current payout ratio is at 78.0%, which is on a high level but given the current situation it is still ok. But it is necessary to watch it closely how the earnings develop when the situation is back to normal again.

Valuation

Price/Earnings: The current P/E ratio is currently at 31.6, which is very high and quite overvalued. I would prefer a P/E ratio of around 25.

Price/Book: The price/book ratio is slightly above the 5-year average. The current P/B ratio is at 2.99 compared to its 5 year average of 2.59.

Debt/Equity: The current debt/equity ratio is at 1.13 which is again on an ok level, given the growth perspective.

Growth: The average growth in the last 5 years was at 7.48%, and I think under normal circumstances we can expect similar growth rates..

Conclusion

To give a detailed valuation about stocks does not make much sense at the moment, there are too many uncertainties around. Doing investments depends a bit more on your feeling and common sense of how the business will develop in the future, and for that NEE is a very good candidate. It will do very well in the future, especially its transmission to solar and wind energy will be very helpful. Nevertheless, the stock is at the moment too expensive a fair price would between 160 to 180 USD. Then I would definitely pull the investment trigger. So let’s hope for another downturn in the stock market.