Better Energy Stock: PlugPower vs. NextEra Energy

Plug Power (NASDAQ: PLUG) and NextEra Energy (NYSE: NEE) are two sides of the same "green wave" coin. Both companies represent a long-term wager on the transition from fossil fuels to renewable energy.

However, while Plug Power is one of the most widely followed speculative growth stocks, NextEra is more like the "slow and steady" blue chip type of play. Many income-focused investors also consider NextEra one of the best renewable energy dividend stocks.

When it comes to choosing one of these renewable energy stocks over the other, you may ask, "Why not both?" After all, in a scenario where the world transitions to zero-net-emissions energy, both companies stand to benefit, right?

Maybe, maybe not. For one, while one of these companies has a growth catalyst completely unrelated to the green wave, the bull case for the other company hinges on a particular type of renewable energy gaining critical mass.

Secondly, while one of these companies has a long-standing issue with cash burn and share dilution, the other has a far more certain path to higher prices, not to mention a strong track record of earnings and dividend growth.

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Plug Power: Despite comeback talk, uncertainty still runs high

Plug Power shares have experienced roller-coaster price action over the past few years. During the early 2020s, when Biden administration-era changes in energy policy suggested significant growth ahead for hydrogen stocks, shares traded at split-adjusted prices above $40 per share.

However, between failing to meet high expectations, coupled with macroeconomic and political changes that affected the adoption of "green hydrogen," or hydrogen power generated from renewable sources, Plug Power experienced a more than 98% drop in price.

More recently, however, Plug Power has embarked on a comeback. Shares have zoomed from as low as $0.69 per share last May to just over $3 per share today. Chalk this up to a spate of bullish developments, including the recent announcement of better-than-expected quarterly results.

A factor driving these improved results is the company's pivot away from "green hydrogen" and back toward being a provider of hydrogen power products, such as electrolyzers, and hydrogen-fueled material handing equipment.

Management is now confident that Plug Power will hit positive income this year and become generally accepted accounting principles (GAAP) profitable by 2028.

However, uncertainty remains high. For one thing, Plug Power has a history of making promises it ultimately fails to keep. For instance, back in 2021, management was touting Plug Power as a billion-dollar business by 2025. Last year, revenue came in at around $710 million, with the company reporting a net loss of around $1.7 billion.

Also, while Plug could indeed grow in the years ahead, share dilution may limit the extent to which this positively impacts Plug's share price. Plug Power likely needs to raise additional cash to fund growth and cover near-term operating losses.

In February, shareholders approved a plan to increase the company's authorized share count from 1.5 billion to 3 billion shares outstanding. While not certain, this suggests that management may be mulling another dilutive equity raise.

NextEra Energy: A renewable growth story at a fair price

Among old-school utility stocks, NextEra has benefited greatly from the renewable energy revolution. The Juno Beach, Florida-based company, parent of Florida Power & Light, has invested billions into renewable energy projects. As a result of its forward-thinking approach to renewables, investors have typically valued the utility at a premium to peers.

But while NextEra tanked, when "green wave" bullishness took a breather from 2022 to 2024, NextEra has picked up an additional growth catalyst. That is, NextEra benefited from rising demand for electricity, driven by the proliferation of artificial intelligence (AI) data centers. Make no mistake: The AI catalyst isn't going to create exponential growth for NextEra, as a "green hydrogen" boom could for Plug Power.

However, this growth could still pave the way for strong total returns for this stock. Management anticipates NextEra's earnings to grow by around 8% annually over the next decade, in line with prior growth rates. This should help the stock sustain its 23 times forward earnings valuation, with shares rising in line with earnings growth.

Long term, gains from NextEra's dividend, if reinvested, could significantly boost total returns. NextEra has a forward dividend yield of nearly 2.75%. Having raised its dividend during each of the past 32 years, NextEra is less than two decades away from becoming one of the Dividend Kings, or companies that have raised their dividends for 50 years or more. Dividend growth has averaged just over 10% over the past five years.

Slow and steady is the clear winner here

Plug Power may seem to have tremendous comeback potential, but execution and dilution risk remain high. NextEra Energy, on the other hand, may not "go to the moon" if the stars align perfectly, but even if the situation merely turns out as expected, the stock could generate strong gains over a long time frame.

For individual investors, where time in the market matters more than timing the market, Next Era is clearly the stronger choice.

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