Our best performing utility holding is NextEra Energy (NEE), which generates most of its electricity from wind, solar, and nuclear power plants, explains Jim Pearce, growth and income specialist and editor of Investing Daily's Personal Finance.
Formerly known as FPL Group (Florida Power & Light), the company serves five million customer accounts in the southern half of Florida.
Until two months ago, NextEra had enjoyed a smooth ride up the charts, more than doubling in value since we added it to our portfolio less than four years ago. However, from March 4 through March 23, NEE lost more than a third of its value along with the overall stock market. Since then it has recovered more than half that amount and is back into positive territory for the year.
On April 22, NextEra released Q1 results for its three operating subsidiaries that included a 7.4% increase in earnings per share (EPS) on a 9.2% improvement in net income for its FPL (direct to consumer) business versus the same quarter last year. Its other direct to consumer division, Gulf Power, recorded flat earnings growth on an 8% gain in net income.
The company’s wholesale operations performed even better than its retail business with an 11.3% jump in adjusted EPS on a 13.3% gain in net income.
NextEra noted signs of diminishing demand due to the pandemic but reiterated guidance for adjusted EPS growth in the 6% to 8% range through 2022. The firm entered this year with $650 million in net liquidity and only $300 million in debt maturing this year, with no other debt maturing until 2024.
NextEra was able to raise its quarterly cash dividend to $1.40 in February while most companies were heading in the opposite direction. NextEra pays a forward annual dividend yield of 2.3%. Given its solid Q1 results and strong balance sheet, we’re rising the buy limit for NextEra Energy to $265.
