NextEra Energy: Built for Long-Term Growth?

Forget the allure of companies promising groundbreaking innovations. While some of these may, in fact, provide handsome returns, the savviest investors know that the road to greater personal wealth is largely paved with tried-and-true stocks that can provide a firm foundation for one's portfolio -- stocks like utility powerhouse NextEra Energy (NYSE: NEE).

But it's not only the fact that NextEra Energy stock has outperformed the market for the past two decades that makes it an alluring attraction. Between management's steadfast commitment to rewarding shareholders -- its dividend currently offers a forward yield over 3% -- and the company's conservative business model, NextEra Energy will appeal to those looking to fortify their portfolios. Since there are so many things to like about the stock, it's worth asking if the company has the power to prosper over the long term.

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The (electric) nature of its business

One of the largest regulated electric utilities in North America, NextEra Energy primarily generates revenue from its two businesses: Florida Power and Light (FPL) and NextEra Energy Resources. With over six million customers, FPL mostly serves retail customers, while NextEra Energy Resources operates renewable energy assets throughout the United States.

The conservative nature of the company's business is demonstrated in two distinct ways. Because FPL is a regulated utility, NextEra Energy is guaranteed certain rates of return on its Sunshine State operations by the Florida Public Service Commission.

Similarly, NextEra Energy Resources also represents a low-risk business. From solar power to battery storage to wind power to nuclear power, NextEra Energy Resources has a diversified portfolio of clean energy assets totaling about 38 gigawatts (GW). The company inks long-term power-purchase agreements (PPAs) with customers in wholesale electricity markets to which it sells the energy, capacity, credits, and other products.

A prodigious producer of profits... and more

While the nature of NextEra Energy's business model should light up the eyes of investors who are seeking reliable companies, management's adept ability to generate profits will make them downright sparkle. Averaging an annual earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 51.8% from 2020 through 2024, NextEra Energy has consistently demonstrated superior profitability on an EBITDA margin basis over the past 10 years compared to its closest peers based on market capitalization: Southern Company and Duke Energy.

NEE EBITDA Margin (Annual) data by YCharts.

Besides its strong EBITDA margin, NextEra Energy's proficiency in growing operating cash flow further differentiates it from its peers.

NEE Cash from Operations (Annual) data by YCharts.

Of course, it bears remembering that simply because the company has succeeded in these regards over the past decade doesn't guarantee similar growth over the next decade; however, it's certainly an auspicious sign that's worthy of recognition.

Moreover, NextEra Energy has averaged a payout ratio of 81% over the past five years, and the company has hiked the dividend higher for more than 30 consecutive years -- all of which should help assuage the concerns.

What's powering future growth?

To ensure that NextEra Energy achieves growth in the coming year, investors can expect management to pull several levers. For one, the company will certainly petition the Florida Public Service Commission to raise rates on its regulated electric utility customers. Already, the company has proposed raising base rates by about $1.6 billion and $0.9 billion for 2026 and 2027, respectively.

Another growth option for the company is the advancement of projects that currently are in the backlog of NextEra Energy Resources. In 2024, NextEra Energy Resources added about 1.4 GW of wind-generating capacity, 2.5 GW of solar-generating capacity, and 0.8 GW of battery-storage capacity. As of late April 2025, NextEra Energy had a backlog of renewable energy projects that totaled 28 GW and 300 GW in the pipeline.

Lastly, the company can grow through acquisitions as it has repeatedly done in the past. In 2019, for example, NextEra Energy added about 470,000 customers when it acquired Southern Company's regulated electricity business Gulf Power, which operates in northwestern Florida, for about $4.4 billion. Growing its electricity transmission business, NextEra Energy completed a $502 million acquisition of GridLiance in 2021.

Is now the time to power your portfolio with NextEra Energy stock?

From the opportunities to expand its renewable energy portfolio to its ability to grow its regulated electricity business through rate increases and acquisitions, it's clear that NextEra Energy has the capacity to continue growing in the coming years. And with the stock trading in early June at 11.4 times operating cash flow, a discount to its five-year average cash-flow multiple of 14.9, now seems like a great time to click the buy button.

Should you invest $1,000 in NextEra Energy right now?

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Duke Energy. The Motley Fool has a disclosure policy.