NextEra Energy (NEE) is the largest electric utility in the U.S. with a market value of $138 billion. It operates two businesses: Florida Power & Light, one of the best-run and fastest-growing utilities in the country, and NextEra Energy Resources, the leading developer of wind and solar power in the U.S. NextEra Energy offers investors a compelling combination of green growth and dividend income.
Why NextEra Energy is a leader in renewable energy
NextEra Energy has been investing heavily in renewable energy for more than a decade, and it has paid off. The company has the largest portfolio of wind and solar assets in the U.S., with more than 28 gigawatts of capacity. It also has a pipeline of over 15 gigawatts of new projects that are expected to come online by 2024.
NextEra Energy is not only a leader in renewable energy, but also a pioneer in innovation. The company is developing new technologies such as battery storage, hydrogen, renewable fuels, and carbon capture to enhance its green portfolio and reduce its carbon footprint. NextEra Energy aims to achieve net-zero carbon emissions by 2050.
NextEra Energy’s renewable energy business is not only good for the environment, but also for its profitability. The company generates stable and long-term cash flows from its contracted assets, which have an average remaining life of 16 years. The company also benefits from favorable tax credits and incentives that support its growth.
How NextEra Energy rewards its shareholders
NextEra Energy is not only a growth stock, but also a dividend stock. The company has a track record of increasing its dividend for 29 consecutive years, making it a Dividend Aristocrat. The company currently pays a quarterly dividend of $0.385 per share, which translates to an annual yield of 2.7%.
NextEra Energy’s dividend is lower than the industry average of 3.5%, but it has grown much faster than its peers. The company has increased its dividend by an average of 10% annually since 2007, and it expects to continue growing it by at least 10% per year through 2024. This means that investors who buy NextEra Energy today can expect to receive a yield of over 4% on their cost basis by 2024.
NextEra Energy’s dividend growth is supported by its strong earnings growth. The company expects to grow its adjusted earnings per share by 6% to 8% annually through 2026, reaching around $4 per share by then. The company also has a solid balance sheet, with a debt-to-equity ratio of 0.9 and an investment-grade credit rating.
How NextEra Energy compares to its peers
NextEra Energy is not the only utility that is investing in renewable energy, but it is the most dominant one. The company has a larger and more diversified portfolio of green assets than any other utility in the U.S., giving it a competitive edge in the fast-growing market.
NextEra Energy also has a superior utility business in Florida Power & Light, which serves 5.8 million customers in one of the most attractive states for population growth and economic development. The utility has been consistently delivering low-cost and reliable service to its customers, while also investing in decarbonizing its generation fleet and building related infrastructure.
NextEra Energy trades at a premium valuation compared to its peers, but it also offers higher growth potential and dividend growth. The company’s forward price-to-earnings ratio is around 20, while the industry average is around 17. However, the company’s earnings growth rate is around 9%, while the industry average is around 6%.
NextEra Energy’s stock price has underperformed the S&P 500 index this year, falling 18% from its peak in late 2021. However, this could be an opportunity for long-term investors to buy this green powerhouse at a reasonable price.
