AEP vs NEE: Dividend Yield, Growth & Safety Comparison
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.
Key Metrics Comparison
| Metric | AEP | NEE |
|---|
| Dividend Yield | 3.07% | 2.49% |
| Annual Dividend | $3.72 | $2.27 |
| 5-Year CAGR | 13.4% | 10.2% |
| Payout Ratio | 54% | 69% |
| Consecutive Years | 16 | 30 |
| Price | $129.48 | $93.81 |
Yield Comparison
American Electric Power Co Inc (AEP) currently yields 3.07%, which is solid for the broader market. That's 0.57% more than Nextera Energy Inc (NEE), which yields 2.49%. In dollar terms, AEP pays $3.72/share annually versus NEE's $2.27/share.
Dividend Growth
Over the past five years, AEP has grown its dividend at a 13.4% CAGR compared to NEE's 10.2%. 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's dividend safety is rated "Safe." The payout ratio of 54% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x. NEE's dividend safety is rated "Moderate." 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. AEP's payout ratio of 54% is more conservative than NEE's 69%, suggesting more room for future increases.
Income Comparison
A $10,000 investment in AEP generates approximately $307/year in dividend income, compared to $249/year from NEE — a difference of $58/year. At $100,000, that gap widens to $580/year.
Verdict
- Best for income: AEP
- Best for growth: AEP
- Best for safety: AEP
Frequently Asked Questions
Which has a higher dividend yield, AEP or NEE?
American Electric Power Co Inc (AEP) has a higher dividend yield of 3.07% compared to Nextera Energy Inc (NEE) at 2.49%.
Is AEP or NEE a better dividend growth stock?
American Electric Power Co Inc has the stronger dividend growth with a 5-year CAGR of 13.4%, compared to Nextera Energy Inc's 10.2%.
Which is safer for dividend income, AEP or NEE?
American Electric Power Co Inc's dividend safety is rated "Safe" while Nextera Energy Inc is rated "Moderate." The payout ratio of 54% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x. 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.
How much income does $10,000 in AEP vs NEE generate?
A $10,000 investment in AEP generates approximately $307/year in dividends, while the same amount in NEE generates about $249/year.
Is AEP or NEE a Dividend Aristocrat?
American Electric Power Co Inc is a Dividend Contender (16 years) and Nextera Energy Inc is a Dividend Aristocrat (30 years).
Which has a lower payout ratio, AEP or NEE?
American Electric Power Co Inc has a lower payout ratio of 54% compared to Nextera Energy Inc's 69%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
AEP vs NEE: which is better for retirement income?
It depends on your priorities. AEP for current income, AEP for dividend growth, AEP for safety. Many retirement investors hold both for diversification.
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