NextEra Lights up Florida

12/09/2019 5:00 am EST


James Pearce

Director of Research, Investing Daily

Who says you can’t do well by doing good? Apparently, no one told the folks at NextEra Energy (NEE) that you can’t turn a decent profit while helping the world burn cleaner fuel , notes Jim Pearce, editor of Investing Daily's Personal Finance.

NextEra is an electric utility company headquartered in Florida that owns Florida Power & Light, Gulf Power and NextEra Energy Resources. It claims to be “the world’s largest generator of renewable energy from the wind and sun and a world leader in battery storage.”

During the third quarter of 2019, NextEra recorded adjusted earnings per share (EPS) of $2.39 versus $2.17 during the same period last year despite widespread power outages caused by Hurricane Dorian in September.

NextEra is making substantial investments in new power generating facilities. The company added 1,373 megawatts (MW) of capacity to its backlog during Q3, raising the total backlog to more than 12,000 MW. Eventually, that excess capacity will equate to future net income from which dividends are paid.

Over the next three years, NextEra is projecting adjusted EPS to grow at a compound annual growth rate (CAGR) of 6% – 8%. That figure does not include any accretion from acquisitions of additional facilities made in Florida during the past year.

Although NextEra’s dividend yield of 2.1% is only slightly higher than the S&P 500, the company raised the amount of its cash dividend by 15% during the past year and is likely to raise it again. In fact, NextEra is projecting a 12% – 15% average annual growth rate in the amount of its distribution over the next five years.

The dividend is considered as safe as an investment-grade bond, yet it is growing its renewable energy business at a rate that rivals a tech stock. We don’t see that changing anytime soon.

We added the stock to our model income portfolio in September 2016 as “a safer way for income investors to get higher yields.” Little did we know then that it would turn out to be one of our better growth stocks, too.

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