This article was co-produced by Dividend Sensei and edited by Brad Thomas.
It's been a great year for the stock market, as well as slow-growing "boring" defensive sectors like utilities.
A Great Year For Utilities
Two of my favorite utilities, NextEra Energy (NEE) and NextEra Energy Partners (NEP), have outperformed the sector, delivering outstanding returns as well as safe and rapidly growing dividends.
We consider 11/11 quality Super SWAN (and dividend aristocrat in 2020) NextEra Energy to be the best-regulated utility in America, and NEP is my favorite yieldCo (renewable energy utility). Both have mastered US green energy and proven themselves to be great compounders of income and wealth over time.
NextEra Energy Total Returns Since 1986
(Source: Portfolio Visualizer) portfolio 1 = NEE
NextEra has managed to beat the S&P 500 by 3% annually over the last third of a century, with 77% less volatility over time, and superior average rolling returns across all time periods.
NextEra Energy Partners Total Returns Since 2015
(Source: Portfolio Visualizer) portfolio 1 = NEP
NextEra Energy Partners, the yieldCo that specializes in renewable energy projects NEE builds and then sells to it, has similarly outperformed the S&P 500, with slightly greater but still utility like long-term volatility.
Let's look at three reasons that, at the right price, both NEE and NEP are as close to "must own, buy and hold forever" stocks as exist on Wall Street. But most importantly, discover what kind of realistic returns both overvalued companies can deliver in the future, and what prices are required for them to deliver historical double-digit and market-beating performance going forward.
NextEra Energy is the sponsor and provides the management for NextEra Energy Partners, whose role is to buy its renewable projects, once long-term power purchase agreements or PPAs have been secured.
Basically NEP is similar to an MLP in that it's a source of financing for NEE's renewable ambitions. NEP is taxed as a corporation, paying qualified dividends and using a 1099 tax form. It's safe to own in retirement accounts such as IRAs and 401Ks.
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