Shares of NextEra Energy Partners (NEP -0.89%) are flying high today -- they were trading 6% higher as of noon ET Thursday after hitting a high of 8.6% earlier in the day. After slashing its dividend growth outlook unexpectedly last month, the renewable energy stock just got an analyst upgrade, even as it tried to regain investor confidence by providing insight into its future plans.
Why an analyst just upgraded NextEra Energy Partners stock
After a series of rating downgrades and price target cuts in recent weeks, NextEra Energy Partners stock got a stamp of approval from CIBC analyst Mark Jarvi yesterday, who raised the stock's price target to $33 a share from $31 per share, according to TheFly.
Jarvi highlighted how NextEra Energy Partners is still risky, given how dependent its near-term funding and buyout obligations are on the impending sale of its pipeline assets. Yet, the analyst believes the stock can weather the recent sell-off, as the company's latest quarterly numbers and outlook reveal its intention to sustain its revised dividend growth goal.
As a quick reminder, in September, NextEra Energy Partners slashed its annual dividend growth goal to 5% to 8% through 2026 from its previous guidance of 12% to 15% growth. The company cited higher interest rates as the major hurdle to funding its growth and dividends. It also said it plans to repower its existing wind power assets to grow instead of relying on drop-down transactions with its parent company, utility giant NextEra Energy.
NextEra Energy Partners stock has plunged since, and its yield has surged to 12.7%. However, the company's latest updates may provide investors some respite.
NextEra Energy Partners released its third-quarter numbers a couple of days ago. It reported $247 million of cash available for distribution (CAFD) during the quarter, up 33% year over year. Management also reiterated its goal to increase dividend per share by 5% to 8% through 2026, with a target of 6%.
More importantly, NextEra Energy Partners said it is on track to sell its natural gas pipeline portfolio as planned. It also announced plans to repower (refurbish or replace existing turbines with more powerful ones) 740 megawatts of wind facilities through 2026 and to continue to look for additional repowering opportunities across its 8-gigawatt portfolio to generate attractive CAFD yields.
Should you buy NextEra Energy Partners stock now?
A dividend growth cut didn't sit well with investors in NextEra Energy Partners, but the stock's steep sell-off appears unwarranted. The company has plans in place to generate enough CAFD to grow dividends annually by around 6% through 2026, and it still has its parent's backing. The stock, though, is still down 50% since Sept. 27, making it a luring long-term buy for investors looking to bet on renewable energy.
