Shares of renewable energy project owner NextEra Energy Partners (NYSE: NEP) dropped as much as 5.4% in trading on Monday as investors worried that inflation data due this week will cause the Federal Reserve to increase interest rates again.
Tomorrow, the closely watched U.S. Consumer Price Index reading will come out, which is a key input to the Federal Reserve’s decision to increase interest rates or not. High inflation can push the Fed to raise rates, and a 0.4% month-over-month increase in inflation back in September is reason for worry about the upcoming numbers.
For NextEra Energy Partners, the reason interest rates are so important is the company has $2.2 billion in debt coming due before 2026, and the company will likely see interest rates jump dramatically when that happens. This will reduce cash available for distribution and ultimately the dividend, which currently yields 14.3%. So the stock can move wildly based on the ups and downs of interest rates.
Debt costs will certainly be a headwind for NextEra Energy Partners, but management has already said they’re cutting expected dividend increases and lowering costs in order to adjust. The current dividend yield may not remain where it is, but there’s lots of room to reduce the payout and still have a profitable investment for the long term.
I think investors are overlooking the strength in NextEra Energy Partners’ business, and days like this present a buying opportunity for long-term investors.
10 stocks we like better than NextEra Energy Partners
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and NextEra Energy Partners wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 6, 2023
Travis Hoium has positions in NextEra Energy Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]