NextEra Energy Partners (NYSE:NEP) saw its shares plunge today after Barclays downgraded the clean energy company from Hold to Sell and cut the price target from $32 to $25. Barclays analyst Christine Cho suggested that without new funding, NEP might have to slash its dividend by 45%-75% to handle its $3.7B in upcoming payments due from 2026-32.
Cho noted that NEP’s high payout ratio and limited ability to take on more debt leave few options besides cutting dividends. Even though NEP has about two years before these payments are due, Cho doubts the situation will improve enough for NEP to stick with its current strategy.
Investors Are “Pricing In” a Dividend Cut
It seems like investors are already pricing in a dividend cut. Indeed, NEP’s current dividend yield is above 10%, which is greater than its historical range pictured below. A drastic cut, like the one mentioned by Barclays, would bring it in line with this range.
Is NEP Stock a Good Buy?
Overall, analysts have a Hold consensus rating on NEP stock based on two Buys, four Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 48% decline in its share price over the past year, the average NEP price target of $31.71 per share implies 8.08% upside potential.
