A well-respected utilities stand-by, NextEra Energy (NYSE:NEE) controls electric companies that provide electricity to over 5 million customers in the state of Florida. Not everyone would consider NextEra Energy stock to be the most exciting investment, but there’s no denying that the company is huge and the returns have been steady.
That steadiness is, by and large, the main source of NextEra Energy stock’s reliable dividends. For many year, income-focused investors have looked to this stock as an alternative to government bonds (which pay very little nowadays) for consistent yield.
But don’t write NextEra Energy stock off as a “boring” electric-company investment. The company has a clean energy business, known as NextEra Energy Resources, with outstanding growth potential.
Is it possible for one stock to effectively combine a traditional, “steady Eddie” investment with a future-forward vision of a greener, cleaner future? Stick around as the bull thesis for NextEra Energy stock might surprise you.
A Closer Look at NextEra Energy Stock
So, here’s where NextEra Energy stock’s reputation for being “boring” comes from. The stock has a five-year monthly beta of 0.21. In other words, it moves slowly compared to the overall stock market.
But just because a stock moves slowly, this doesn’t mean that it’s not making gains. On the first day of September, NextEra Energy stock is hovering near $75. That’s pretty close to it its all-time high price.
In order to get there, NextEra Energy stock had to make a powerful move from its 52-week low of $43.70. Thus, even a low-beta stock can post huge gains. There’s nothing “boring” about that.
What precipitated this year’s big move in NextEra Energy stock? It’s probably related to the onset of the novel coronavirus. More people are staying at home for work and for recreation. This means that they’re using more electricity, in all likelihood, and that’s bullish for an electric company like NextEra.
Besides, the appeal of NextEra Energy stock isn’t just the price appreciation. There’s the consistency of the yield, as well. Currently, the stock’s forward annual dividend yield is close to 2%. That’s a nice little extra income source for loyal long-term shareholders.
Undeniable Earning Power
To be honest, I could easily make a strong argument in favor of owning NextEra Energy stock based on the company’s current financials.
For instance, during the third quarter, NextEra’s adjusted earnings per share increased by approximately 11% compared to the prior-year comparable quarter. Plus, the company raised its adjusted earnings per share expectations for 2021 by 20 cents (on a pre-split basis).
There are more impressive stats from NextEra’s third-quarter data, but surely you get the idea by now. The company is a traditional energy powerhouse and business is great in that area.
Yet, I want you to consider why the company is called NextEra Energy. Assuredly, it’s because of the company’s commitment to the next era, which undoubtedly involves clean energy sources.
Charging Up for the Future
NextEra Energy Resources is currently the largest producer of wind and solar energy in the world. Yet, that’s not good enough for an ambitious company like NextEra.
For one thing, the company has contracts in place to allocate nearly $800 million into Californian battery storage projects by the end of 2022.
John Ketchum, CEO of NextEra’s energy resources segment, explains that the company seeks to provide California with “more low-cost, emission-free solar energy during more hours of the day, as well as improved reliability across the regional electric grid.”
On top of that, NextEra is planning a $65 million green hydrogen pilot project. Focused on one of NextEra’s utilities in Florida, the project could be up and running by 2023.
CFO Rebecca Kujawa is clearly eager to move forward with this ambitious green hydrogen program. “[T]o achieve an emissions-free future, we believe other technologies will be necessary, and we are particularly excited about the long-term potential of hydrogen,” commented Kujawa.
The Bottom Line
When we look at the bigger picture, it’s evident that there’s nothing at all “boring” about NextEra Energy stock.
The dividend distributions are consistent and the share price is on an upward trajectory. And perhaps best of all, NextEra is diligently preparing for the next era of clean, sustainable energy.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
