We recently compiled a list of the Dividend Stock Portfolio: 8 Stocks To Invest In According to Reddit. In this article, we are going to take a look at where NextEra Energy, Inc. (NYSE:NEE) stands against the other dividend stocks.
Investment trends have been shifting steadily in line with market movements. Technology stocks have become the focal point, outpacing all other asset classes. Moreover, dividend stocks are gaining traction with investors due to their capacity to provide steady income. While these stocks are trailing behind the broader market, the inclusion of major tech companies in the dividend space has sparked enthusiasm among financial experts regarding the future of dividend investing. Retail investors are also on the lookout for reliable income sources, reinforcing this trend. According to a report by JPMorgan Chase, non-professional investors now account for a larger portion of the US options market than ever before, with a particular focus on short-term trades and a preference for technology stocks. In June, retail traders set a new record by contributing 18.3% of all options activity. Over 60% of their trades involved contracts set to expire within a week or less, with tech options being the most popular choice in individual stock trades.
A Forbes report highlighted that retail trading hit a peak in 2023, making up around 23% of the trading volume during one week early in the year. This demonstrates that the influence of retail investors extends beyond the meme stock craze. The report, which also referenced data from the Federal Reserve System, noted that despite recession concerns, median net worth jumped 37% between 2019 and 2022, marking a record increase. As a result, more people became active in the stock market.
Retail investors, much like experienced investors, are increasingly drawn to dividend stocks due to the growing interest in them. When investing in dividend stocks, investors tend to favor high-quality companies—those with a strong history of regularly raising their dividends. Experts have observed that the Dividend Aristocrats index, which tracks firms with a minimum of 25 consecutive years of dividend growth, has delivered better performance than the broader market over time. Dan Lefkovitz, a strategist for Morningstar Indexes, also favored dividend stocks in the current market environment. Here are some comments from the analyst:
“Investing in dividend-paying stocks is a good way to participate in equities over the long term. There have been long stretches when the dividend-paying section of the market has outperformed. Eventually, they’ll come back into favor. Dividend-paying stocks have a value bias. To the extent that there’s a rotation away from technology and growth into the value side of the market and more old economy sectors, that’s going to benefit the dividend-paying portion of the market.”
Despite underperforming last year, global companies still delivered record dividends to shareholders. Income investors worldwide saw a particularly strong second quarter in 2024. According to the latest Janus Henderson Global Dividend Index report, payouts increased by 5.8% on a headline basis, reaching an all-time high of US$606.1 billion. The underlying growth was even more robust at 8.2%, once the impact of exchange rates, especially the weak Japanese yen, was factored in. Following this strong performance and accounting for the significant contributions from new dividend payers this year, Janus Henderson has upgraded its 2024 dividend forecast. The global dividend distribution is now projected to reach US$1.74 trillion, reflecting a 6.4% underlying growth compared to 2023 (up from the previously expected 5.0%) and a headline rise of 4.7% (up from 3.9%). With this, we will discuss some of the best dividend stocks for a dividend stock portfolio.
Our Methodology:
For this list, we carefully examined popular Reddit trading forums such as r/dividends, r/WallStreetBets, r/stocks, and r/trading, where everyday investors discuss and exchange investment ideas. After conducting comprehensive research and analysis, we selected 20 dividend stocks that were getting a lot of attention on Reddit as of September 21. From this group, we chose 15 stocks that had the most hedge fund investors, as tracked by Insider Monkey, during the second quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A wind turbine, its blades spinning to generate clean renewable energy.
NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) ranks fourth on our list of the best stocks for a dividend stock portfolio. Retail investors favor the company due to its strong business model. Over the past few decades, the demand for clean energy has steadily risen, and the company has consistently invested in expanding its capacity and operations to meet this demand. Analysts also believe that the company is well-positioned to benefit from the growing need for renewable energy, particularly from tech companies. These companies are working to meet their climate targets while also expanding their energy-hungry data centers.
According to the US Department of Energy, solar and wind energy accounted for just 13% of the electricity generated in the country in 2022, but this percentage is projected to grow in the coming years. Additionally, the overall demand for electricity in the US is on the rise. NextEra Energy, Inc. (NYSE:NEE) surged by nearly 35% since the start of 2024, surpassing the broader market, which gained over 20% during this period.
ClearBridge Investments also highlighted AI momentum in the energy sector in its Q2 2024 investor letter. Here is what the firm has to say about NextEra Energy, Inc. (NYSE:NEE):
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
On July 25, NextEra Energy, Inc. (NYSE:NEE) declared a quarterly dividend of $0.515 per share. The company has been rewarding shareholders with growing dividends for the past 28 years. The stock’s dividend yield on September 21 came in at 2.5%.
NextEra Energy, Inc. (NYSE:NEE) was a part of 73 hedge fund portfolios at the end of Q2 2024, up from 72 a quarter earlier, according to Insider Monkey’s database. These stakes have a total value of over $2.1 billion. Among these hedge funds, GQG Partners was the company’s leading stakeholder in Q2.
Overall NEE ranks 4th on our list of the best dividend stocks to buy. While we acknowledge the potential of NEE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NEE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
