NextEra Energy (NEE) has been an unstoppable growth stock. The clean-energy infrastructure company has expanded its adjusted earnings per share at an 8.4% compound annual rate since 2006. Meanwhile, it has grown its dividend at an even faster 9.8% compound annual rate. These catalysts have powered NextEra to nearly triple the total returns of the S&P 500 over the last 15 years.
The renewable-energy-powered juggernaut has ample growth still ahead. It sees a jaw-dropping $4 trillion investment opportunity over the next 30 years to decarbonize the U.S. economy. As a leader in this space, NextEra is a no-brainer growth stock to buy and hold long term.
One chart says it all
NextEra is the largest electric utility in the country and a world leader in producing wind energy and solar power. It currently has 63 gigawatts (GW) of power-generation assets in operation, the bulk of which produce lower carbon energy. However, that’s a fraction of the opportunity it sees ahead as the U.S. decarbonizes by building out additional renewables and storage capacity:
IMAGE SOURCE: NEXTERA ENERGY INVESTOR PRESENTATION.
As that chart shows, the company estimates that the U.S. needs to invest $2 trillion to build the renewable and storage capacity required to decarbonize the power sector. That would grow its current capacity 17-fold over the next 30 years.
In addition, the overall investment potential doubles to $4 trillion to fully decarbonize the economy by using renewables to produce hydrogen to help power heavy industries and other sectors. That represents an enormous investment opportunity for NextEra.
High-powered growth for years to come
NextEra Energy expects to deploy $85 billion to $95 billion of capital through 2025 to capitalize on this opportunity by growing its operations. It has already secured an industry-leading 20 GW of renewable-energy development projects in its energy resources segment that it expects to build out over the next few years. It also expects to invest heavily in transmission and distribution projects, renewable natural gas, hydrogen, and building out a national water utility.
These investments have NextEra Energy on track to grow its adjusted earnings per share by a roughly 10% annual rate through 2025 at the high end of its guidance range. Meanwhile, it expects operating cash flow to grow at or above that level. This forecast supports the company’s view that it can grow its dividend by around a 10% annual rate through at least 2024.
The company expects to continue growing rapidly for the next few decades. Driving that growth is its real zero strategy, which it unveiled earlier this year. That plan will eliminate carbon emissions from its operations by 2045, while also helping decarbonize the U.S. power sector and economy.
The company’s Florida utility expects to deploy hundreds of millions of solar panels, growing its capacity from 4 GW to 90 GW. It also plans to expand its energy-storage capacity from 500 megawatts to 50 GW and replace natural gas at its power plants with renewable natural gas and green hydrogen.
Meanwhile, its energy resource business expects to continue building out renewable-energy capacity, transmission lines, and other infrastructure to decarbonize the power sector and economy. These investments should enable NextEra to continue growing its earnings and dividends at attractive rates in the coming years.
Powerful growth ahead
NextEra Energy has plugged into the decarbonization megatrend. It has powered above-average growth over the last several years, which seems likely to continue. Because of that, NextEra is a no-brainer investment for anyone seeking a growth stock to energize their portfolio.
— Matthew DiLallo
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Source: The Motley Fool