NextEra Energy Partners (XIFR -0.42%) enables investors to generate lots of dividend income these days. The renewable energy producer's dividend yield is currently over 10%. That's several times higher than the S&P 500's dividend yield (1.3%).
Here's a look at how much you'd need to invest in the renewable energy dividend stock to generate $1,000 in annual dividend income.
A supercharged dividend
NextEra Energy Partners currently pays a quarterly dividend of $0.8925 per share ($3.57 annually). You'd need to own about 280 shares to generate $1,000 of annual dividend income at that rate. With shares recently trading at around $33 apiece, it would cost about $9,250 to buy those shares. For comparison, a similar investment in an S&P 500 index fund would only produce about $120 of annual dividend income.
The renewable energy company could generate even more income for its investors in the future. NextEra Energy Partners expects to grow its payout rate by 5% to 8% per year through 2026, with a target of 6% annually. Powering that growth is its plan to repower existing wind farms by replacing older turbines with larger ones that can produce more electricity.
However, there's a caveat that investors need to keep in mind: NextEra Energy Partners expects its dividend payout ratio will be in the mid-90s through 2026. That's a very high level, even for a company that generates very stable cash flow by selling renewable energy under long-term, fixed-rate agreements to utilities and large corporate buyers. If the company runs into any financial issues, it might need to reduce or suspend its high-yielding dividend.
A higher-risk, high-yield dividend stock
NextEra Energy Partners currently offers a very high dividend yield. That enables investors to generate a lot of income for every dollar they invest in the renewable energy producer. However, with that higher-yielding payout comes a higher risk profile, which investors need to keep in mind before buying shares for income.
