This leading energy stock has consistently provided impressive total returns throughout its existence.
NextEra Energy (NEE 0.43%) has established itself as a powerhouse in wealth generation over the decades. Over the past 20 years, this utility has delivered an average annual total shareholder return exceeding 14%, significantly surpassing other utilities and the S&P 500. Its robust returns can be attributed to NextEra Energy’s adeptness at growing both its earnings and dividends at healthy rates.
The electric utility is well-positioned for ongoing growth in shareholder value. Here’s how a $1,000 investment made in October could potentially exceed $2,800 over the next decade.
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Strong Earnings Growth on the Horizon
Over the last two decades, NextEra Energy has achieved an impressive 9% compound annual growth rate in adjusted earnings per share. This steady growth has allowed the utility to increase its dividend at an approximate 10% compound annual rate during the same span. The synergy between rising earnings and dividends has substantially benefited investors. Over the past decade, NextEra Energy produced a stunning 14.8% annualized total return, turning a $1,000 investment into nearly $3,977. An investment made 20 years ago would now be worth upwards of $12,150.
The utility anticipates an adjusted earnings per share growth of 6% to 8% annually through at least 2027. This outlook is considered conservative, as NextEra has expressed confidence in achieving growth near the top end of its guidance through that time frame.
Capital Investments Driving Future Growth
NextEra Energy’s near-term earnings growth is underpinned by significant capital investments, particularly in its regulated electric utility, Florida Power & Light (FPL). This segment is projected to benefit from Florida’s increasing population and abundant sunshine, as FPL ramps up investments in solar energy to provide low-cost electricity to its expanding customer base. With an estimated 8% annual increase in its rate base through 2029, these investments are crucial for continued earnings expansion.
Moreover, NextEra’s energy resources division remains a leader in renewable energy, catering to the mounting demand for clean power from utilities and large corporations. The company expects to invest $75 billion through 2028 on new renewable projects, battery storage solutions, and electricity transmission initiatives. These efforts are anticipated to drive ongoing strong earnings growth in this segment.
Favorable Long-term Outlook
NextEra Energy possesses substantial visibility into its earnings growth trajectory for the coming years. Additionally, its long-term outlook is becoming increasingly optimistic, suggesting that the company can maintain robust growth in the upcoming decade.
FPL will continue to thrive due to Florida’s rapid population growth—projected to increase from 23.7 million this year to 26.7 million by 2040, according to S&P Global. The electric utility is investing heavily in solar energy to meet the anticipated power demand increases, operating the largest utility-owned solar energy portfolio in the nation at over 7.8 gigawatts. FPL aims to add more than 17 gigawatts of solar generation capacity and an additional 7.6 gigawatts of battery storage within the next ten years, boosting solar capacity from 9% to 35% by 2034.
In parallel, the surge in electricity demand in the U.S., fueled by AI data centers, manufacturing onshoring, and the rise of electric vehicles, is expected to further drive demand for renewable energy and natural gas-fired power plants, potentially even new nuclear capacity in the 2030s. As a leader in diverse energy sources, NextEra Energy stands to benefit significantly from this anticipated rise in power demands.
Conclusion
In summary, NextEra Energy is poised to grow its earnings per share by approximately 8% annually through at least 2027, with strong potential for maintaining or exceeding that growth rate in the long term. This performance is likely to support ongoing increases to its 3% dividend yield. With a combination of consistent dividend growth and compounded return potential, NextEra Energy is positioned to achieve an impressive 11% average annual total return, which could transform a $1,000 investment made in October into over $2,800 by 2035. For those looking into promising energy stocks, NextEra presents a compelling opportunity.
Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy and S&P Global. The Motley Fool has a disclosure policy.