To prior generations of investors, investing in a utilities company like NextEra Energy (NYSE:NEE) was basically an alternative to owning government bonds. That’s because NEE stock offered a solid dividend yield and had a low beta, meaning it didn’t make wild moves.
Times have changed, though, and government bonds haven’t offered much yield lately. So, already we have a compelling reason to choose utilities stocks instead of bonds.
Still, informed investors have every right to ask why they should choose NEE over other utilities stocks. What’s so special about NextEra Energy?
I’m more than happy to answer that question — there are multiple reasons to add NEE stock to your portfolio. And those reasons tend to suggest that NEE offers not only the safety of a utilities stock, but growth prospects that could enrich patient long-term shareholders in the future.
A Closer Look at NEE Stock
So, let’s start with the dividend. The forward annual dividend yield for NEE stock is currently 1.89%. That’s not likely to make you rich overnight, but it’s in line with what many other large-capitalization utilities stocks offer.
Next, it’s worth mentioning that NextEra’s trailing price-to-earnings ratio is 37.45. By that metric, it’s fair to say that shares aren’t super-cheap, but also not horrendously overpriced.
Now, check this out. NEE =’s five-year monthly beta is a ridiculously low 0.18. In other words, the stock is exceptionally safe as it moves much slower than the overall market.
But don’t assume that this name is boring just because it’s relatively safe. From the 52-week low of $43.70 in March to November’s 52-week high of $83.34, NextEra nearly doubled in price. That’s pretty impressive for a utilities stock — wouldn’t you agree?
A New Energy Policy
As President Donald Trump’s administration begins to take steps transitioning to a Joe Biden presidency, investors must adjust and adapt their strategies.
This could mean veering away from energy companies that depend excessively on fossil fuels. It could also mean allocating capital towards utilities companies that focus on green energy sources.
If you’re ready to make a change in your portfolio in anticipation of a new, cleaner energy policy, NEE stock is definitely worth your attention. As InvestorPlace contributor Will Ashworth pointed out, NextEra is “the world’s largest generator of renewable energy from wind and sun and battery storage.”
With a backlog for renewable energy projects exceeding 15,000 megawatts, NextEra’s poised to lead — if not dominate — the next era of American clean energy policy. Obviously, the company’s name is fitting.
Moreover, it’s been reported that the energy firm has a $65 million pilot project in the works that’s “going to utilize solar energy to generate hydrogen.” Clearly, this utilities company is willing and able to steer away from dependence on fossil fuels as a revenue source.
By now, I should have convinced you that NextEra Energy is a utilities-market giant. Yet, would it be reasonable to conclude that this name is shaping up to be the Amazon (NASDAQ:AMZN) of utilities?
It’s a bold claim, sure. Nevertheless, I would assert that NEE stock has what it takes to be a dominator in its space over the coming years.
Amazon is known for gobbling up smaller companies that offer value. It’s a sign that Amazon is not only huge, but also ambitious and ready for bigger and better things.
Much like Amazon, NextEra appears to have bold ambitions. Not long ago, the firm made a move to take over another utilities giant, Duke Energy (NYSE:DUK). This would have created America’s biggest utilities company.
The moves to acquire both Duke and Evergy haven’t yet been successful. Still, these chapters aren’t necessarily finished as it’s not unusual for early offers to be rejected during the negotiation process.
It might seem like an exaggeration to compare NextEra Energy to Amazon. Yet, the two companies both appear to have ambitions of growth and market domination.
Now, you might agree or disagree with the Amazon comparison. It’s indisputable, though, that this company is preparing for the future of clean energy. And you can prepare as well, with a long position in NEE stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content -and crossed the occasional line -on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets