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The utility sector is shifting as electricity demand is expected to rise, potentially supporting faster growth than the slow-and-steady pattern investors have historically associated with the industry. Within that changing landscape, two dividend-focused utilities—NextEra Energy (NEE) and Black Hills (BKH)—offer different approaches to returns.
NextEra Energy operates two distinct businesses. It owns one of the largest regulated utilities in the United States, with Florida Power & Light benefiting from in-migration to Florida. This regulated segment is described as slow and steadily growing.
The company’s primary growth driver is its unregulated clean energy business. NextEra Energy has built this division into one of the world’s largest producers of solar and wind power.
That growth engine has supported dividend growth of around 10% per year over the past decade. Management expects the dividend growth rate to slow over the next few years to roughly 6%, which is still characterized as attractive. The article also cites a well above market dividend yield of 2.6%.
For conservative investors, the article highlights Black Hills as a more straightforward option because it is described as a “boring” regulated utility. Black Hills is also noted for its Dividend King status—one of just six utilities to have achieved it.
The article states Black Hills offers a 3.7% dividend yield, compared with an average utility yield of around 2.6%.
The article also flags a key risk: Black Hills is in the middle of a merger with NorthWestern Energy. Shareholders have approved the deal, but it still requires regulatory approval.
It also notes that the merger is not expected to change the basic nature of the business, since both companies are described as regulated utilities. The merger is expected to increase the scale and diversification of the combined company.
Both companies are described as well-run, but the article frames them as suitable for different dividend strategies. It suggests NextEra Energy is more likely to fit investors seeking dividend growth, while Black Hills is positioned as the option for investors primarily looking for a reliable dividend-paying utility with Dividend King status.
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