WEC Energy: An attractive dividend gem compared to NextEra Energy

NextEra Energy is considered one of the best-managed companies in the energy sector. However, this very strength has led to a significant rise in the stock price, and its valuation may already reflect its full potential. Those looking for an attractive mix of dividend income and dividend growth might want to consider WEC Energy. NextEra Energy excels through continuous dividend growth and a strong position in the renewable energy sector. For over three decades, the firm has been able to increase its dividends annually, achieving an impressive growth rate of 10% annually over the last ten years. According to management, this growth is expected to continue at a rate of 10% per year until at least 2026, supported by a projected earnings increase of 6% to 8%. The main issue with NextEra Energy, however, is its valuation. The company's success is widely recognized, often resulting in the stock trading at a premium compared to the rest of the utility sector. While investors can achieve a dividend yield of around 2.6% with NextEra, the average yield for utilities, as represented by the Utilities Select Sector SPDR ETF, is about 3%. In contrast, WEC Energy currently offers a dividend yield of 3.6%. Not only is this higher than the average for utilities, but it is also approximately 33% higher than NextEra Energy. Despite a slightly slower dividend growth rate of 7% over recent years, this higher starting yield might be attractive for investors seeking stable income. WEC Energy is not as large or diversified as NextEra, but it supplies natural gas and electricity to 4.7 million customers in Wisconsin, Illinois, Michigan, and Minnesota. It is a more conservative company but still has significant plans. With an investment plan of $23.7 billion over the next five years, it aims for annual earnings growth of 6.5% to 7% until 2028, likely leading to similar dividend increases. Overall, due to its higher initial yield and solid growth prospects, WEC Energy might be an attractive alternative to NextEra Energy, especially for investors seeking a balanced mix of yield and dividend growth.