NextEra Energy’s NEE well-chalked-out capital investment plan, addition of renewable generation assets, battery storage and strategic acquisitions are going to drive its performance over the long run.
The stock is exposed to the inherent risk of operating nuclear generation facilities. Also, unfavorable supply costs could adversely impact earnings.
Factors Acting as Tailwinds
NextEra Energy plans to invest nearly $74.6 billion in the 2025-2029 period to strengthen its infrastructure and add more clean electricity generation assets.
The contribution from organic and inorganic assets results in stable free cash flow, which allows the company to increase shareholders’ value through dividends and share repurchases. The current buyback authorization will enable the company to buy back 180 million shares. The company expects to increase the dividend rate by nearly 10% annually through at least 2026, subject to the approval of its board of directors. NextEra Energy’s current dividend yield of 2.99% is better than the Zacks S&P 500 composite’s yield of 1.52%.
The company is advancing on its clean energy transition by pairing renewable generation with increasing battery storage. Battery storage allows NextEra Energy to store surplus renewable energy and deliver it during high-demand periods, reducing fluctuations and reliance on fossil-fuel-based generation. By pairing storage with solar and wind assets, the company improves efficiency and grid stability, making renewables more appealing to regulators and utilities.
NEE also makes strategic acquisitions to expand its operations. The buyouts of Gulf Power Company, Florida City Gas and ownership stakes in two natural gas power plants from Southern Company will further expand the regulated natural gas operation of NEE and be accretive to its earnings over the long term. Acquisitions of a large portfolio of operating landfill gas-to-electric facilities by Energy Resources will support the company’s expanding RNG business.
The company has plans to generate more energy from clean sources and systematic investments are helping it to do the same. The investments are also aiding NEE to lower carbon emissions from the production process. In addition, utilities like Duke Energy Corporation DUK, Xcel Energy XEL and Dominion Energy D are investing considerably to reduce carbon emissions and add more renewable and clean sources in their generation portfolios.
Headwinds
The operation and maintenance of NEE's nuclear generation facilities involve environmental, health and financial risks that could result in fines or closure of the facilities, as well as increased costs and capital expenditures.
Unfavorable supply costs, necessary to provide full energy and capacity requirement services, could have an undesirable impact on the company’s earnings outcome. The still-high interest rate is a concern for the capital-intensive industry.
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Xcel Energy Inc. (XEL): Free Stock Analysis Report NextEra Energy, Inc. (NEE): Free Stock Analysis Report Duke Energy Corporation (DUK): Free Stock Analysis Report Dominion Energy Inc. (D): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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