This Ultra-High-Yield Dividend Stock Could Face a Day of Reckoning in January 2025

Core Viewpoint - NextEra Energy Partners is facing challenges with its strategy shifts, which have not yielded the expected results, leading to potential changes in its dividend payments starting in January [1][7]. Group 1: Dividend and Growth Strategy - NextEra Energy Partners currently offers a high dividend yield in the mid-teens, with a 6% increase in its payout over the past year [1]. - The company has reduced its dividend growth target from an annual rate of 12%-15% to 5%-8%, aiming for a target of 6% [2]. - Plans to grow dividends at a 6% annual rate through at least 2026 have been removed from the latest earnings report, indicating a shift in strategy [3]. Group 2: Financial Challenges and Adjustments - Rising interest rates have negatively impacted the stock price, making it difficult for the company to issue shares to fund convertible equity portfolio financing (CEPF) buyouts [2]. - NextEra Energy Partners is selling off its natural gas pipeline assets to help finance its CEPF buyouts and renewable energy acquisitions [2]. - The company is evaluating alternatives to address its future CEPF buyouts and cost of capital, suggesting a potential reduction in dividends to retain cash for reinvestment [4][5]. Group 3: Future Outlook - The absence of previous growth expectations in the latest earnings report indicates a more cautious outlook for the company [4]. - NextEra Energy Partners may need to reduce its dividend payout ratio from the mid-90s range to 50%-70% to align with other energy infrastructure companies [5]. - A significant dividend adjustment is anticipated next year, which could disappoint income investors but position the company for sustainable long-term growth in the renewable energy sector [7].