AEP vs NEE: Dividend Comparison
Dividend data as of
American Electric Power Co Inc (AEP) and Nextera Energy Inc (NEE) are both in the Utilities sector, making them natural rivals for dividend investors. AEP edges ahead on yield at 3.07% versus NEE's 2.49%. For dividend growth, AEP leads with a 5-year CAGR of 13.4% versus NEE's 10.2%. AEP holds the edge in dividend safety with a "Safe" rating. AEP is a Dividend Contender while NEE is a Dividend Aristocrat.
Verdict
Yield Analysis
AEP yields 0.57% more than NEE. In dollar terms, AEP pays $3.72/share vs NEE's $2.27/share annually.
Dividend Growth
AEP: Dividend growth is accelerating — the 3-year CAGR of 21.3% exceeds the 5-year rate of 13.4% and the 10-year rate of 9.1%.
NEE: Dividend growth has been steady, with a 3-year CAGR of 10.1% and a 5-year CAGR of 10.2% (10-year: 11.2%).
Dividend Safety
AEP: The payout ratio of 54% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x.
NEE: The payout ratio of 69% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.4x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in AEP vs NEE today?
At $129.48 per share, $10,000 buys about 77.2 shares of American Electric Power Co Inc (AEP). Each share pays $3.72 per year in dividends, so the position starts out generating roughly $287 per year — about $24 a month.
At $93.81 per share, $10,000 buys about 106.6 shares of Nextera Energy Inc (NEE). Each share pays $2.27 per year in dividends, so the position starts out generating roughly $242 per year — about $20 a month.
AEP is the larger income stream from day one: $46 per year more on the same $10,000 invested.
What could $10,000 of AEP or NEE income look like in 10 years?
American Electric Power Co Inc (AEP) has raised its dividend about 13.4% a year over the past five years. If that pace held, the $307 per year that $10,000 generates today at the current 3.07% yield would reach $1,081 per year by 2036 — a 10.8% yield on the original cost.
Nextera Energy Inc (NEE) has raised its dividend about 10.2% a year over the past five years. If that pace held, the $249 per year that $10,000 generates today at the current 2.49% yield would reach $657 per year by 2036 — a 6.6% yield on the original cost.
On those trailing rates, AEP pays more in 2036: $1,081 versus $657 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would NEE's dividend growth overtake AEP's higher yield?
It doesn't, on the trailing numbers. American Electric Power Co Inc (AEP) yields more today (3.07% vs 2.49%) and has also grown its dividend at least as fast (13.4% vs 10.2% a year over five years). Unless NEE accelerates its raises or AEP stumbles, NEE never closes the income gap — AEP wins on both current income and growth.
Can AEP and NEE afford their dividends?
American Electric Power Co Inc (AEP) earns $6.83 per share against $3.72 paid out in dividends — 1.8x coverage (a 54% payout ratio).
Nextera Energy Inc (NEE) earns $3.28 per share against $2.27 paid out in dividends — 1.4x coverage (a 69% payout ratio).
AEP's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for NEE if earnings weaken.
Which fits an early-retirement income portfolio better, AEP or NEE?
For income you need right now, American Electric Power Co Inc (AEP) leads: $100,000 invested today pays about $256 a month at the current 3.07% yield, versus $208 a month from Nextera Energy Inc (NEE) at 2.49%.
AEP also leads on dividend growth (13.4% vs 10.2% a year over five years), so the trailing numbers favor it on both fronts.
On consistency: AEP has raised its dividend 16 consecutive years; NEE has raised its dividend 30 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $1,462/yr in AEP vs $840/yr in NEE by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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