Investing in utilities stocks has, for generations, been thought of as an alternative to owning bonds. Thus, owning shares of NextEra Energy (NYSE:NEE) was considered a safety play as NEE stock has offered consistent returns with a decent dividend yield.
As times change, though, so must our investing strategies. In mid-November, it appears that former Vice President Joe Biden is the president-elect of the U.S. His approach to addressing clean energy and climate change will indubitably differ from President Donald Trump’s.
As a result, it’s essential for current and prospective NEE stock holders to examine Biden’s stance on green energy. In addition, it’s important to look closely at how NextEra and its stakeholders could stand to benefit from Biden’s energy policy.
And so, as we move quickly toward a new year and a new presidential administration, there may be reasons to view NEE not as a safety stock or an alternative to bonds, but as an investment with outstanding growth potential.
NEE Stock at a Glance
Before delving into green-energy policy, let’s take a step back and look at NEE stock for a moment. This stock has a trailing-12-month price-to-earnings (P/E) ratio of 38.16, which is fairly competitive among NextEra’s peers in the utilities sector.
I wanted to emphasize the P/E ratio from the outset because cautious investors might observe that NEE stock has posted impressive gains in 2020. The company’s valuation shouldn’t be a concern as long as the company is profitable, and the P/E ratio suggests that this is indeed the case.
The next important feature of NEE stock to be aware of is its five-year monthly beta, which is 0.18. This means that it has historically been a slow-and-steady mover compared to the stock market overall.
Don’t be surprised if that changes in 2021, however, as a Biden administration could give NEE stock holders a major shot in the arm. Meanwhile, investors can sit back and collect quarterly dividend distributions, as the company offers a decent forward annual dividend yield of 1.85%.
Massive Clean-Energy Company
If you truly want to own a stake in a utilities giant, NEE stock is an obvious choice. NextEra’s market capitalization is a stunning $145.4 billion. This dwarfs the market caps of most other utilities companies.
NextEra’s size should provide a competitive advantage as companies seek to step up their clean-energy efforts. Currently, the company claims to be “the world’s largest generator of renewable energy from the wind and the sun.”
That’s a big claim to make. Yet, NextEra has the stats to back it up. It:
- Operates more than 14,100 megawatts of emissions-free wind energy
- Plans to bring online an additional 5,500 megawatts of clean, emissions-free wind energy for 2020 to 2021
- Has added over 6.5 million new solar panels in the U.S. during the past three years
- Plans to install 30 million solar panels in the U.S. by 2030
- Expects nearly 700 megawatts of battery storage projects to be online in California by the end of 2022
Major Policy Shift
Those stats are certainly impressive, but they wouldn’t mean as much if the government didn’t support clean-energy initiatives.
Assuming that Biden will be president in 2021, however, the runway should be clear for NextEra to pursue its emissions-free projects.
Some folks might point out that Republicans will continue to control the Senate. That may be the case, but the Biden administration is still likely to push hard to promote its $2 trillion climate policy plans.
For one thing, the Biden administration intends to re-join the Paris climate agreement. Plus, Biden will push for economy-wide net-zero emissions in the U.S. by the year 2050.
Additionally, the Biden administration plans to invest $400 billion over ten years into clean energy and innovation. The exact details of this investment plan aren’t known yet. Still, it’s probable that wind and solar projects will be financially encouraged in some way.
NEE stock was known as a slow-moving safety stock for many years. NextEra is a huge company, so there’s still an element of safety with NEE.
But this doesn’t mean that NEE stock will always be a slow mover. With the likely Biden boost for clean-energy initiatives, NextEra investors can expect a powerful combination of safety and growth in 2021.
NEE stock currently has a “B” rating in my Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NEE. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.