NextEra Energy Rallies Despite Big, Beautiful Bill's Blow to Clean Energy: Is the Stock Still a Buy?

Key Points

• Donald Trump's "big, beautiful bill" rolls back hundreds of billions of dollars in clean energy tax credits.

• NextEra Energy, which derives 99% of its energy from renewables, was thought to be in the bill’s crosshairs.

• The stock is well positioned for dividend growth and capital appreciation despite political headwinds.

• 10 stocks we like better than NextEra Energy ›

President Donald Trump on July 4 signed into law the "big, beautiful bill," which rolls back over $200 billion in clean energy tax credits, in a move some have described as a "disaster" for the clean energy industry.

Florida-based utility company NextEra Energy (NYSE: NEE), which provides 12 million people with electricity and is America's largest provider of clean energy, stands to lose potentially hundreds of billions of dollars in tax credits that directly offset as much as 60% of the cost of new clean energy projects. The stakes were so high for the company that its CEO, John Ketchum, penned an open letter pleading with Congress to preserve clean energy incentives.

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But a surprising thing has happened since the bill's passage: NextEra Energy shares have ticked up as part of a broader rally for clean energy stocks.

Despite the setback from Washington, NextEra Energy is well positioned to outperform markets and continue increasing its dividend for years to come. Here's why.

A large pipeline of early- and late-stage projects

NextEra Energy got a break from the Treasury Department on Aug. 15 when it released guidance saying that companies would be eligible for remaining clean energy tax credits, even with less than 5% of the total project cost paid by the July 5, 2026, deadline. Beginning physical work will be enough to qualify.

Solar stocks soared on the news, with NextEra shares rallying roughly 5% that day. That's in part because NextEra already has a 7.2-gigawatt backlog in solar projects, and Ketchum is well aware of what's needed to qualify for those tax credits. As he put it in the late July second-quarter 2025 earnings call: "... our view is pretty simple and pretty straightforward. The begin construction term has been around for well over a decade."

Image source: Getty Images.

For context, a gigawatt of electricity is enough to power 750,000 homes. NextEra is still planning an expansion of clean energy projects that could serve perhaps 10 million new customers in the years ahead.

For instance, the company's Florida Power & Light business, the largest electric utility provider in Florida, plans to add 8 gigawatts of solar and battery storage capacity by 2029. The company is also planning to expand its nuclear generation portfolio, and is in talks with regulators on restarting Iowa's only nuclear power plant, the Duane Arnold Energy Center, to add to its four nuclear units in Florida.

And while Ketchum didn't specify exactly how many of these clean power projects already meet the "begin construction" standard to qualify for the credits, the company has almost a year to bring them to that threshold.

A healthy, growing dividend while investors wait for more growth

In addition to having one arm of its business, Florida Power & Light, provide electricity to millions, NextEra Energy's other business, NextEra Energy Resources, is one of the largest energy infrastructure developers in the United States. With America's energy demand set to skyrocket thanks largely to power-hungry artificial intelligence (AI) data centers, rising demand for electricity will be an important tailwind for the company.

Of course, only time will tell whether NextEra can lay claim to those lucrative tax credits by next July. And the "inflection point" that Goldman Sachs is warning of in electricity demand from the AI revolution is still a few years away. But as investors wait for surging electricity demand to boost NextEra's earnings and, ultimately, share price, the company looks well positioned to continue its decades-long streak of increasing dividends.

In the Q2 earnings call, Ketchum reiterated his expectation that NextEra will hike its dividend by around 10% next year. The company has now raised its dividend every year since 1994, including a 10% increase this year.

As you can see below, the company has maintained double-digit percent dividend growth in each of the last four quarters, which roughly tracks its earnings and revenue growth (the exception, a 17% dip in revenue in Q2 2024, came as higher interest rates ramped up NextEra's borrowing costs).

Data source: Company quarterly filings.

NextEra's payout ratio of 75% means that the company already pays out 75% of its earnings in dividends, which is higher than income investors like to see. However, the company grew earnings by 25% year over year last quarter, which suggests earnings growth is exceeding the rate of dividend hikes.

All told, NextEra has raised its dividend by 629% in the 31 years since 1994, including annual hikes during the collapse of the dot-com bubble, the 2008-2009 financial crisis, and the pandemic-era lockdowns. Not only is that well above the 117% rate of inflation seen in the same time frame, but it's also a testament to management's resolve to reward shareholders.

The utility giant could be a good bet

Based on this history, strong fundamentals and earnings growth, and the imminent boost from supercharged demand for electricity in the age of AI, NextEra Energy is well positioned to deliver market-beating returns in the years ahead, both in the form of continued dividend increases and capital appreciation.

While the "big, beautiful bill" that's now law was "tough," in Ketchum's words, he also called it "constructive" in that management now knows the rules that energy companies must abide by -- and now NextEra can play to win. This company, which has beaten analysts' earnings expectations for each of the last four quarters, may surprise a lot more people in the years ahead. NextEra stock could be a worthwhile buy for income-focused investors who also want for market-beating capital appreciation over time.

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William Dahl has no positions in the stocks mentioned in this article. The Motley Fool has positions in and recommends Goldman Sachs Group and NextEra Energy. The Motley Fool has a disclosure policy.