NextEra: Not your Typical Utility

12/07/2018 5:00 am EST


Chloe Jensen

Chief Analyst, Cabot Dividend Investor

Utilities are the textbook example of safe income stocks, with their reliable income streams leading many to have increased their dividends every year for decades, asserts Chloe Lutts Jensen, income expert and editor of Cabot Dividend Investor.

NextEra Energy (NEE) isn’t your typical utility stock. Founded as Florida Power & Light back in the 1920s, company’s regulated utility subsidiary is still called FPL and still provides electricity to the most populous parts of Florida.

About 46% of FPL’s energy comes from natural gas, 26% from nuclear and 22% from wind. Revenues are stable, regulated and grow steadily along with Florida’s population.

NextEra owns wind and solar installations in 35 states and Canada, as well as battery storage sites, natural gas pipelines and a handful of nuclear plants. About 69% of the division’s energy comes from wind, 14% from nuclear and 11% from solar. The company says it’s the world’s largest generator of renewable power.

NextEra’s renewable power business now brings in between a quarter and a third of operating revenues, and is growing much faster than the utility business.

Overall, the company’s EPS have grown by 20% per year, on average, in each of the last five years. Analysts expect EPS to grow by another 16% this year and 8% next year. And NextEra has a huge backlog of projects — mostly wind and solar — already approved that should continue to drive growth into the future.

NextEra also pays a reliable dividend, and currently yields about 2.5%. The company has paid dividends every year since 1983, and has increased the dividend every year since 2005. The stock is now pulling back from its highs just slightly, and can be bought here for long-term growth and safe income.

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