1 Dividend Stock That Just Gained 5% When the S&P 500 Index Plunged 3%

TradingKey - Investors in US stocks are feeling some serious pain right now. On Monday (10 March), following a deep sell-off last week, stock markets in the US fell further into the red.

The S&P 500 Index closed the day down 2.7%, hitting its lowest level since September 2024, while the tech-heavy Nasdaq Composite Index got hammered – it fell 4% for its worst single-day drop since September 2022.

Some big tech stocks declined sharply, with Tesla Inc (NASDAQ: TSLA) down 15% and Palantir Technologies Inc (NASDAQ: PLTR) falling 10%. 

President Trump sparked the continued selling on Monday when, in an interview recorded over the weekend, he declined to comment on whether he expects a US recession this year. With US recession fears rising, investors headed for the exits with the mentality of “sell first, ask questions later”.   

However, one dividend-paying company actually saw its share price rise 4.6% on Monday. Here’s why that was the case and how investors should be thinking about the stock market for the rest of this week.

NextEra Energy stock pops on good news

One of the world’s largest renewable energy developers – NextEra Energy Inc (NYSE: NEE) – was one of the few S&P 500 Index constituent stocks that actually rose on Monday.

NextEra owns two businesses: the huge Florida electricity provider and utility Florida Power & Light (FPL) and the world’s largest clean energy development business named NextEra Energy Resources (NEER).

During the market selloff, clean energy stocks across the board actually jumped on the back of positive news for the sector. When President Trump was elected, many investors sold out of renewable energy stocks on fears that clean energy sources would be penalised by the incoming administration.

However, the reality has been rather different. On Monday, 21 Republican members of Congress sent a letter to House Ways and Means Committee Chairman Jason Smith that urged him not to make swingeing cuts to subsidies for renewable energy.

Looking to protect Inflation Reduction Act tax credits

Investors should remember that many benefits of the huge Inflation Reduction Act (IRA), that was implemented under President Biden, provides subsidies for clean energy but many Republican states (i.e. under the political party of President Trump) are actually benefitting from these clean energy credits within the IRA. 

The IRA offered US$370 billion in tax credits to various clean energy sources, from wind and solar to nuclear.

Indeed, the letter, which asked that “any proposed changes to the tax code be conducted in a targeted and pragmatic fashion” was cited by NextEra Energy CEO John Ketchum at a conference in Houston, Texas.

Ketchum commented that the letter highlights that issues – like clean energy tax credits – are “super important to meeting the power demand in a cost effective way in this country.”

NextEra Energy also benefits from being a Utilities stock

One other reason why clean energy stocks jumped is the fact that many operating within the sector are Utilities stocks. These stocks benefit when interest rates get cut.

While the sector has struggled in recent years, if the Federal Reserve (Fed) does cut interest rates to help stave off a deep US recession, then companies like NextEra Energy will benefit as their dividend-paying shares become more attractive to investors.   

This is also true of more defensive-minded sectors under the Global Industry Classification System (GICS), that is created by index provider MSCI. Utilities is one of those sectors, alongside Healthcare, that has historically shown to outperform the broader stock market during US recessions.

That’s because cash flows from Utilities and Healthcare companies are predictable in that there will always demand for their services. That’s particularly true of NextEra Energy, which has managed to grow its dividend per share (DPS) at a consistent rate of an annualised 10% over the past 20 years.

Furthermore, NextEra Energy is one of the largest companies in the Utilities sector, despite the company offering a dividend yield that is traditionally slightly lower than the overall sector.

Where next for stock market investors this week?

While that was a rare pocket of good news in the stock market on Monday, investors should be prepared for more volatility this week with the consumer price index (CPI) reading for February coming on Wednesday (12 March).

Index futures in the US are slightly in the green today (11 March) before the market open but that could quickly turn after the opening bell. More data points on the US consumer – the biggest part of the US economy – as well as inflation readings will likely influence the direction for the stock market.

Of course, long-term investors should remember that “bear markets” – which refers to stock market drops of 20% or more from their recent highs – occurs once every 3.5 years. That stock prices are falling should be seen as a healthy correction given the excesses seen in stocks over the past few years.

It could also present a long-term opportunity to accumulate quality stocks for investors who are willing to look past the short-term headlines.