The Utility Stock That's Actually Exciting
Key Points
NextEra Energy has grown its earnings much faster than the average utility.
The company benefits from operating in Florida and having a leading clean power platform.
It's in a strong position to continue growing briskly in the future.
- 10 stocks we like better than NextEra Energy ›
Utilities tend to be rather boring investments. They're typically slower-growing companies that pay higher-yielding dividends. That makes them ideal for investors seeking stability and income.
However, NextEra Energy (NYSE: NEE) isn't your average utility stock. It's growing much faster than its peers, enabling it to produce exciting total returns.
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The exciting utility stock
NextEra Energy has grown its adjusted earnings per share at a more than 10% compound annual rate over the past three-, five-, and 10-year periods. That's much faster than the low-to-mid single-digit growth rate of its utility sector peers.
Two factors have powered its faster growth rate. NextEra Energy owns the largest electric utility in the U.S. (Florida Power & Light). That entity benefits from operating in one of the fastest-growing states. It has also capitalized on Florida's abundant sunshine to build out a leading solar energy platform. Additionally, NextEra's energy resources segment has capitalized on the rising demand for renewable energy by building out one of the world's largest clean power platforms.
The company should continue growing briskly in the coming years. Power demand is on track to surge, driven by AI data centers, new manufacturing facilities, and the increasing adoption of electric vehicles. The company is in an excellent position to capitalize on this demand due to its expertise in developing clean power solutions. NextEra Energy has already lined up a large backlog of renewable energy projects it expects to complete over the next few years. Additionally, it's restarting a dormant nuclear energy facility, which should come back online in 2029.
As a result, it should deliver around 8% annual earnings-per-share growth through 2027, while increasing its 2.7%-yielding dividend at a double-digit rate through at least next year. It could grow even faster beyond that time frame as power demand from AI data centers hits its stride.
That rapid growth rate could give NextEra Energy the power to produce robust total returns in the coming years, making it an exciting utility stock to buy right now.
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Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.
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