One stock that meets the investment qualifications of a lot of investor constituencies is NextEra Energy (NEE), observes dividend reinvestment expert Chuck Carlson, editor of DRIP Investor.
The company’s steady utility services make it appealing to more conservative investors. The dividend yield of nearly 2% provides appeal for dividend investors.
The company’s growth prospects — per-share profits in 2021 should be more than double 2013’s profits — give it appeal to growth investors. And the firm’s position as the nation’s largest provider of wind and solar energy makes it an attractive investment for “green” investors.
The stock has posted solid gains in recent years. Nevertheless, I see further upside for the stock. Recently splitting 4 for 1, NextEra Energy stock represents a solid total-return investment for any DRIP portfolio.
NextEra Energy owns two electric companies in Florida. Florida Power & Light serves more than five million customer accounts in Florida and is the largest rate-regulated electric utility in the U.S. Its Gulf Power Company serves 470,000 customers in eight counties throughout northwest Florida.
The firm also owns NextEra Energy Resources, which together with affiliated entities, is the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage.
The company’s market capitalization of nearly $150 billion makes it the largest utility company in the world in terms of market capitalization.
NextEra is an excellent example of what can happen when you combine the power of compounding, a rising dividend stream, and a solid-performing stock.
Over the last five years, a $10,000 investment in NextEra Energy stock, with reinvestment of dividends, would have grown to more than $34,000 — a 245% return.
That return crushes the return of the S&P 500 over the same time period. Of course, investing is all about the future, and NextEra’s future looks attractive.
The company’s strengths in renewable and “clean” energy seem well timed given the ongoing transition to clean energy. And the firm’s primary utility service area in Florida should show population growth well ahead of the national average.
NextEra appears to be interested in growth via acquisitions. The firm has been rumored to be interested in acquiring Duke Energy and Evergy.
Whether regulators will permit a company of NextEra’s size to acquire other utilities is an open question. Nevertheless, the company’s interest in acquiring other utilities is evidence that the firm clearly sees value and opportunity in the utility sector.
The company’s dividend stream has been growing at a healthy clip, up 61% since 2016. I would expect future annual dividend growth to be in the 7%-10% range.
NextEra Energy is not a cheap stock by utility standards. The shares trade at 30 times 2021 consensus earnings estimate of $2.50. Thus, the shares are vulnerable during market corrections. Nevertheless, NextEra is no ordinary utility.
The company’s exposure to growing energy markets, solid dividend growth, and rising bottom line make it a stellar selection in the utility sector.
Please note NextEra offers a traditional dividend reinvestment plan, which requires ownership of at least one share in order to participate in the plan. Of course, you can also purchase these shares via a broker.
