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NextEra- A Safe Utility with a Clean Energy Twist

·3 min read

NextEra Energy (NEE) is a leading clean energy company. It was previously known as Florida Power and Light (FPL), which is now a division of NEE, notes Genia Turanova, income expert, CFA and a contributing editor to The Dollar Stock Club.

NextEra is focused on serving the state of Florida. Its FPL division is the largest rate-regulated electric utility in the U.S. It serves over 11 million FL residents and was founded in 1925.

NEE is mostly a regulated utility company. Its FPL business is regulated, and the rates it charges are set by state public utility commissions.

More from Genia Turanova: Corning, Cookware & Covid

Overall, the rates are set to ensure the utilities can offer services to the public at an affordable and profitable price. But they’re also based on what the commissions deem a “just and reasonable” return on the investment. This is why regulated utilities are considered safe investments in almost any market. 

One could look at this and say NEE doesn’t have pricing power — and that’s true. As a regulated utility, the business is steady, and profits and dividends can grow steadily. Therefore, utilities are ‘defense’ plays.

Just because this is a defensive play doesn’t mean it’s not growing. NEE has a large unregulated business. And the company is helping to lead the clean energy revolution — it’s the world’s largest generator of renewable energy from the wind and sun, as well as becoming a world leader in battery storage capacity.

We’re seeing a big push towards clean/green energy right now in the U.S. and across the world. The Biden administration is pledging to move towards clean energy and away from dependence on oil. While the transition will take time, investors already started pouring money into clean energy.

Demand for solar power generation has been steadily rising in the U.S. since 2006. In 2019, U.S. shipments of solar panels reached a record high 16.4 million kilowatts (kW), more than 21% higher than the previous record in 2016 of 13.5 million kW.

As technology continues to advance and costs come down, demand and capital will continue to move into the space. Consider this: By the middle of this decade, NEE management expects wind and solar to become cheaper than coal, oil, and natural gas.

The big takeaway is investors’ money is pouring into the largest growth area for NEE (renewables). And it will continue to grow its earning per share (EPS) and dividends as it rewards shareholders.

At current prices, NEE pays around a 2% dividend, or more than 30% higher than the S&P 500 dividend rate. NEE has an excellent track record of raising its dividend. Over the last 15 years, it increased its dividend almost 300%. And investors expect NEE to continue raising its dividend 10% per year in the future.

See also: Intercontinental Exchange: Smooth as ICE

NEE has a strong balance sheet and a solid management team. Take advantage of this trading setup and collect dividends while more money pours into clean energy.

NextEra Energy isn’t a “sexy” stock, but it’s a leader in one of the fastest-growing segments in today’s market, clean energy. And, it’s a consistent, steady business that rewards shareholders through rising dividend payments. Take advantage of the recent pullback in shares and buy this growth and income energy provider.

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