A section of the market believes that U.S. stock markets are pricing in a Donald Trump victory in the upcoming presidential elections and are positioning their portfolios accordingly, including in dividend stocks. However, former President Trump and Vice President Kamala Harris seem locked in a dead heat, and the results are anybody’s call. While many stocks stand to benefit from a potential Harris presidency, in this article we’ll specifically look at 2 dividend stocks that could shine under her tenure.
While the economic policies of Republicans and Democrats diverge across various issues, the contrast is particularly stark with Trump and Harris, who arguably lean more to the right and left of center, respectively, than their average party colleague.
Green Energy Stocks Could Gain If Harris Wins
Especially when it comes to green energy, Trump’s policies are diametrically opposed to both Harris – or for that matter, even President Joe Biden. Harris, incidentally, has sounded even more inclined toward the green energy transition, and could double down on the efforts that Biden took to increase its adoption – even if not to the scale she talked about in her 2019 bid, given the already precarious U.S. fiscal position.
Green energy stocks could be among the biggest beneficiaries of a Harris presidency, and although most companies in the space don’t pay dividends, there are some that offer a decent yield.
Brookfield Renewable Is a Dividend Play on Harris' Presidency
For instance, Brookfield Renewable (BEP) is among the biggest renewable energy producers globally, and has a fat dividend yield of over 5%. The company has increased its dividends at a CAGR of 6% since 2001, backed by strong growth in funds from operations (FFO).
The bulk of BEP’s revenues come from long-term purchase agreements, which provide a lot of stability and predictability to its earnings and cash flows - and by extension, to its dividends. Management intends to grow its dividends by between 5%-9% annually, and is projecting its FFO to rise by 10% or higher in 2024 and beyond.
BEP’s valuations look a lot more grounded now, as the stock has lost almost half of its value since the 2021 highs. It generated a record FFO of $1.67 per unit last year, and that metric is expected to rise to $2 this year. At its current stock price, BEP trades at less than 14x its expected 2024 FFO - which looks quite attractive, especially given where the broader market valuations stand.
Overall, BEP looks like one dividend stock that stands to benefit from a continued, and perhaps even accelerated, green energy transition under a potential Harris presidency. Sell-side analysts have rated the stock as a “Moderate Buy,” and its mean target price of $31.44 is almost 21% higher than Tuesday’s closing prices.
NextEra Energy
NextEra Energy (NEE) is the second green energy dividend play to bet on a Harris presidency. It is the world’s biggest utility company, and has been gradually adding to its portfolio of renewable energy generation assets. During the Q3 earnings call, the company said that by 2027, its renewable generation capacity could potentially double to 81 gigawatts, compared to the current capacity of 38 gigawatts.
NEE expects its 2024 adjusted earnings per share (EPS) to range between $3.23 and $3.43. For the next three years, it expects this metric to arrive between the ranges of $3.45 to $3.70, $3.63 to $4.00, and $3.85 to $4.32, respectively. During the Q3 earnings call, the company said that it “will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges" – an assertion it made during the previous call, as well.
Importantly, over these years, management expects its operating cash flows to grow at the same or higher pace, which should help NEE to maintain and increase its dividends. The company expects its dividends to grow by around 10% annually between 2024 and 2026, with 2024 as the base year.
NextEra Energy Stock Forecast
Of the 19 analysts covering NEE stock, 11 rate it as a “Strong Buy,” and 7 as a “Moderate Buy.” The remaining 1 analyst rates the stock as a “Strong Sell.” NextEra Energy has a mean target price of $87.89, which is 10.5% higher than Tuesday’s closing prices.
NEE stock has a dividend yield of around 2.5%, and is a dividend aristocrat, having increased the payout for 30 consecutive years. The stock traded lower today after announcing a $1.5 billion capital raise to fund its capex plans, and the dip looks like an opportunity to scoop up the shares.
NEE stock trades at a next 12-month (NTM) price-to-earnings (PE) multiple of around 24x, which isn't exactly mouthwatering, but isn't eye-popping exorbitant, either. All of that said, if you want to bet on a Harris presidency with a dividend aristocrat, NextEra Energy might fit the bill.
On the date of publication, Mohit Oberoi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
