Is NRG Energy Stock a Buy?
U.S. utility NRG Energy (NYSE: NRG) offers investors a generous dividend and is promising a fairly bright future. It makes sense that dividend-focused investors would be interested, particularly given the generally conservative view most people have of the utility sector.
But there's a little history lesson that's needed before you jump aboard -- NRG Energy is not your typical utility.
Dividend investors will be attracted to NRG Energy's 4.1% dividend yield. While there are other utilities with similarly high yields, 4.1% is fairly generous, and well above the yield of the broader market; the S&P 500 Index yields just 1.9% or so. Meanwhile, the average utility, using Vanguard Utilities Index ETF as a proxy, yields around 3.4%. NRG Energy is projecting that it will grow its dividend by 7% to 9% over the near term. That's very generous for a utility, and is two to three times the historical growth rate of inflation.
Source Fool.com
