Dividend Stock Showdown: NextEra Energy vs. Dominion Energy -- Which Should You Own?

When it comes to mergers and acquisitions, one of the big questions is always, "Is it better to buy the acquirer or the target?" That's particularly interesting with regard to NextEra Energy's (NYSE: NEE) planned purchase of Dominion Energy (NYSE: D). The key factor is the long approval process that normally accompanies large utility mergers. Here's a look at this merger and which of these two stocks is the better dividend option right now.

Why is NextEra buying Dominion?

NextEra Energy is one of the world's largest utilities and also one of the world's largest solar and wind companies. That said, on the regulated utility side of the business, it primarily operates in just one state, Florida. That's been a net positive for years, as the Sunshine State has benefited from in-migration. However, scale is increasingly important in the utility industry.

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Dominion Energy is a multi-state utility that has slimmed down in recent years, becoming primarily a regulated electric utility. It operates in three states: Virginia, North Carolina, and South Carolina. Notably, in Virginia, it has a regulator-granted monopoly in one of the world's most important data center markets. That sets the company up to benefit from the growth of artificial intelligence (AI).

Essentially, NextEra Energy is expanding its geographic reach while, at the same time, leaning into an expected increase in electricity demand. It looks like a reasonable move, noting that Dominion's operating region is just up the East Coast from Florida. Neither company needs this deal to go through, but it is expected to be immediately accretive to NextEra Energy's business and to improve its growth outlook.

There's a long way to go before the deal is done

The merger was announced in May 2026, and the companies expect it to take 12 to 18 months to obtain all required regulatory approvals. So there's likely at least a year in which Dominion will remain a public company. During that time, Dominion will continue to pay its regular dividend. So there's no particular reason why investors shouldn't own it.

Each Dominion shareholder will receive 0.8138 of a NextEra Energy share upon consummation of the deal, plus a portion of a one-time $360 million cash distribution. The two shares are currently tied at the hip. NextEra is trading around $86 per share, while Dominion is around $68, which is just a little below the transaction price. Given the deal, the two stocks will likely rise and fall in tandem most of the time.

However, there is one area of notable difference. Dominion's dividend yield is currently 3.9%. NextEra Energy's yield is 2.9%. For dividend investors who believe the merger will go through, which seems likely, buying Dominion could allow for a higher income stream until the merger is completed. When that happens, NextEra Energy's dividend policy will become the default. Which isn't terrible, noting that the game plan is for 6% annual dividend growth.

The risk, of course, is that the deal doesn't go through. In that case, Dominion Energy's share price is likely to fall back to its level before the merger announcement. That would mean a drop to around $63 per share, about a 7%. That's a pretty modest downside risk.

Keep things simple or play around at the edges?

The truth is that owning Dominion over NextEra Energy right now isn't going to be a millionaire-maker move. But it could add incrementally to the income stream you generate from your portfolio over the next year or so. For investors who like to keep things simple, buying NextEra Energy is the way to go. However, if you are willing to take on a little extra risk for a little extra income, owning Dominion could be worth the effort, as its acquisition by NextEra works through the necessary checks and balances.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.