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NRG Energy (NRG) Concludes Sale, Announces Repurchase Plans

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NRG Energy Inc. (NRG - Free Report) closes the sale of 4,850 megawatt (MW) of fossil-generating assets from its East and West regions to Generation Bridge. The transaction was announced earlier this year in March. Net proceeds of the transaction were $620 million and it is leverage neutral with $500 million. The deal will help decarbonize NRG Energy’s portfolio.

NRG Energy is focusing on clean generation to lower emissions. On Sep 24, 2019, it announced greenhouse gas reduction goals and under this plan, it targets a 50% emission-cut achievement by 2025 and net-zero emissions within 2050 from the 2014 baseline. NRG announced retiring 1.6 GW or 55% of its PJM coal generation in 2022.

NRG consistently boosts shareholder value via dividend hikes and share repurchase plans. As part of NRG’s Capital Allocation Program, its board of directors authorized $1 billion for share buybacks, effective immediately. The repurchase activity is expected to begin this year and continue throughout 2022. Repurchases will be made via open market purchases, privately negotiated transactions or otherwise. The timing and the number of NRG Energy’s shares repurchased will be determined by its management, based on market conditions and other factors.

In November 2021, NRG Energy increased its 2022 annual dividend by 8% from $1.30 per share to $1.40  and expects an annual dividend growth rate of 7-9% per share over the long term, subject to the board of directors’ approval. NRG has a current dividend yield of 3.41% compared with the Zacks S&P 500 composite’s 1.37%.

Utilities Boosting Shareholder Value

Utilities have a reputation to distribute regular dividends owing to its stable performance and are often considered bond substitutes by investors. These include WEC Energy (WEC - Free Report) , PPL Corp. (PPL - Free Report) and Duke Energy (DUK - Free Report) . While WEC and PPL carry a Zacks Rank #3 (Hold) at present, DUK holds a Zacks Rank 2 (Buy).

The board of directors of WEC Energy plans to raise the first-quarter 2022 dividend to 72.75 cents per share, marking a hike of 7.4% and totaling the annual figure to $2.91 from $2.71. This is in line with its targeted payout ratio of 65-70% of earnings. If approved, the new dividend yield will be 3.27%.

PPL Corp.’s strong cash flow generation capacity enables it to pay consistent dividends to its shareholders. Currently, PPL expects the dividend payout ratio in the range of 60-65%. PPL’s current dividend yield is 5.95%.

Duke Energy’s dividend payment history indicates that it has been performing steadily and generating enough cash flow for a while to distribute dividends to its shareholders. DUK paid out a dividend of $2.34 billion in the first nine months of 2021 compared with $2.11 billion in the same period last year and has a dividend yield of 4.08% at present.

The Zacks Consensus Estimate for 2022 earnings of WEC, PPL and DUK is pegged at $4.29, $1.53 and $5.48, respectively, marking an improvement of 5.3%, 30.5% and 4.9% each from the corresponding year-ago actuals.

Zacks Rank & Price Performance

In the past six months, shares of this currently Zacks Rank #3 (Hold) NRG Energy have gained 5.9%, outperforming the industry’s rise of 1.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research