We recently published a list of 10 Best DRIP Stocks To Own Now. In this article, we are going to take a look at where NextEra Energy, Inc. (NYSE:NEE) stands against other best DRIP stocks to own now.
Dividend investing is often regarded as a strategy that rewards patience, as it tends to generate stronger returns over the long term. Those who commit to holding their investments for extended periods are typically the ones who reap the greatest benefits. A major factor behind the success of this approach is the power of compounding. By reinvesting dividends—using those payouts to purchase additional shares—investors can enhance the growth of their portfolios. Rather than taking the dividends as cash, reinvesting them allows for a steady increase in share ownership, amplifying potential returns. Over time, this method has proven to be highly effective. In fact, a report from Hartford Funds highlights that since 1960, reinvested dividends and compounding have accounted for 69% of the broader market’s total return.
Over the years, analysts have closely monitored the impact of dividend reinvestment and have expressed favorable opinions about its benefits. Steven Greiner, Managing Director of Schwab Equity Ratings at the Schwab Center for Financial Research, supports this approach. He shares the following insight:
“Reinvesting dividends is nearly effortless. Once you set it up—which generally involves simply ticking a box—there’s nothing more to do but sit back and let compounding work its magic. Be aware, however, that companies can reduce or stop paying dividends.”
Steven Greiner’s final point touches on a key concern for dividend investors—the risk of a company suddenly cutting or suspending its dividend payments. No investor wants to be caught in that situation. While many tend to measure success primarily by stock price appreciation, a deeper analysis offers a broader perspective. A study of major global indexes over a 25-year period, ending in March 2018, found that reinvested dividends contributed nearly 3% in additional growth, as reported by Forbes. This underscores the vital role that dividends play in enhancing investment returns beyond just price gains. It serves as a strong reminder that evaluating an investment solely based on stock price movements may offer an incomplete picture. By incorporating dividend reinvestment into the assessment, investors gain a more comprehensive and accurate view of overall performance.
A separate analysis from T. Rowe Price found that over the three decades leading up to 2022, reinvested dividends played a crucial role in market returns, contributing a notable 42.5% to overall gains. The report also emphasized that dividend reinvestment had an even greater impact on a select group of high-performing companies—those that consistently increase their dividends at a rate exceeding the broader market. This effect becomes more powerful over time, as reinvesting a steadily growing dividend further accelerates long-term investment returns.
For long-term investors looking for steady returns, focusing on stocks with strong dividend growth can be a strategic approach. Reinvesting dividends from these stocks allows investors to gradually increase their holdings, leveraging the power of compounding to boost overall returns and steadily grow their wealth.
Our Methodology
To compile this list, we looked through Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024. We specifically chose dividend stocks that provide a dividend reinvestment plan (DRIP) to shareholders. After filtering, we narrowed down the selection to companies with robust and consistent dividend track records. The stocks are ranked in ascending order of the number of hedge funds having stakes in them, as of Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is NextEra Energy, Inc. (NEE) the Best DRIP Stock To Own Now?
A wind turbine, its blades spinning to generate clean renewable energy.
NextEra Energy, Inc. (NYSE:NEE) is an American clean energy company that generates, transmits, and sells electricity. Based in Florida, the company owns and operates Florida Power & Light, the largest electric utility in the US. Its power-generation division is the world’s leading producer of energy from wind and solar sources. NextEra’s management projects that US power demand will grow by roughly 55% between 2020 and 2040. In 2024, the company expanded its generation and storage capacity by about 12 gigawatts and maintains a backlog of 25 gigawatts.
NextEra Energy, Inc. (NYSE:NEE), one of the best DRIP stocks, has surged by over 26% in the past 12 months. In the fourth quarter of 2024, the company saw its adjusted earnings per share (EPS) increase by approximately 2% year-over-year, while its full-year EPS climbed 8.2%. Looking forward, the company aims for adjusted EPS growth of 6% to 8% through 2027, positioning itself to reach the higher end of this target in 2024.
On February 14, NextEra Energy, Inc. (NYSE:NEE) declared a 14% hike in its quarterly dividend to $0.5665 per share. This marked the company’s 29th consecutive year of dividend growth. the stock supports a dividend yield of 3.17%, as of February 23. Its strong track record of dividend payments is mainly supported by its robust cash flow. In fiscal year 2024, the company generated over $13.2 billion in operating cash flow. Looking ahead, it plans to increase its dividend per share by approximately 10% annually through at least 2026, based on its 2024 payout level.
Overall, NEE ranks 9th on our list of best DRIP stocks to own now. While we acknowledge the potential for 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 time frame. 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.
