What Every NextEra Energy Investor Should Know Before Buying

NextEra Energy (NYSE: NEE) is one of the country's largest electric power and energy infrastructure companies. It's a leader in developing and operating clean energy assets, including natural gas, wind, solar, and nuclear energy.

There are a few things every investor should know about the utility stock. Here are two essential factors to consider before buying shares.

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NextEra Energy is more than an electric utility

NextEra Energy operates two very distinct businesses. The company owns Florida Power & Light (FPL), the country's largest electric utility, which provides power to about 12 million people across Florida. FPL is a regulated utility. It has a monopoly in its service area overseen by government regulators who set the rates it can charge customers. Regulated electric utilities tend to be slower-growing companies that benefit from stable demand and predictable rates.

Additionally, it owns NextEra Energy Resources, one of the country's largest energy infrastructure development companies. This entity owns, operates, develops, and acquires energy infrastructure assets, including natural gas pipelines, electricity transmission lines, and renewable energy generating facilities. It owns a mix of regulated and non-regulated assets. The non-regulated assets tend to generate predictable revenue backed by long-term, fixed-rate contracts.

NextEra Energy Resources' assets help support the operations of other utilities. For example, its pipelines transport gas used in gas-fired power plants and distributed by gas utilities, while its renewable energy facilities sell power to electric utilities to support customer demand.

NextEra is growing faster than other utilities

NextEra Energy has grown its adjusted earnings per share at an 8.9% compound annual rate over the past two decades. That's nearly triple the growth rate of the average utility during that time frame (3.3%). The company's compound annual growth rate is even higher over the past decade (10% compared to 3.1% for its peers).

A couple of factors have contributed to its faster growth rate. FPL benefits from operating in Florida, which is growing faster than most other states and has abundant sunshine. That has enabled FPL to invest capital to support the state's rising power demand, including investing in building out a leading solar energy portfolio. Meanwhile, NextEra's energy resources segment has capitalized on the strong and growing demand for clean energy.

The company expects to continue growing briskly over the next few years. It anticipates delivering adjusted earnings-per-share growth at or near the top end of its 6% to 8% annual target range through 2027. It also expects to hike its dividend by around a 10% annual rate through at least next year.

NextEra Energy isn't your average utility company

NextEra Energy has some major competitive advantages over its utility sector peers. It operates in Florida and has built a leading energy infrastructure platform focused on clean energy. These factors have enabled it to grow much faster than the average utility company in the past, a trend that could continue in the future.

Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.