It's been a challenging few years for NextEra Energy (NYSE: NEE), whose stock has not reached new highs in over three years. The diversified energy company is an established dividend stock with 30 consecutive years of annual dividend increases to its name.
So, what's bogging the share price down? Higher interest rates are a likely culprit; they make borrowing more expensive for companies like NextEra Energy, which continually invests billions of dollars to maintain, upgrade, and expand its energy infrastructure. Investors cannot control stock prices or interest rates, but they can view short-term challenges as opportunities to buy for the long term.
Here are four reasons why NextEra Energy is a magnificent stock that you may want to consider buying and holding forever.
1. A stable core business
NextEra Energy consists of two subsidiaries. Florida Power & Light Company is an electric utility that provides electricity to over 12 million people across Florida. NextEra Energy Resources develops, owns, and operates energy generation and storage infrastructure. It's the world's leading producer of wind and solar energy.
Approximately 70% of NextEra Energy's business is rate-regulated, meaning the government helps set its prices. While regulation caps the return on NextEra Energy's capital investments, it keeps competitors out and helps the business produce predictable, steady revenue streams.
Modern society can't function without energy, so NextEra's business is recession-resilient.
2. Favorable growth trends
Rising energy demand has created and sustained a healthy environment for NextEra to continue investing in expanding and upgrading its assets.
Florida Power & Light Company operates in one of America's fastest-growing states, both in population and the economy. It's a healthy backdrop for investment -- the utility has grown its deployed regulatory capital by 11.2% annualized over the past decade.
Meanwhile, NextEra Energy Resources has enjoyed consistent demand as renewable energy increases its share of the U.S. energy grid. Forecasts from the IHS Outlook and McKinsey estimate that U.S. power demand may increase by 55% from 2020 levels by 2040, with data centers for artificial intelligence and other technology adding the most incremental demand.
Simultaneous market share gains and broader demand growth could create an appetite for growth in renewables for the foreseeable future.
3. Steady and growing dividend
Buying NextEra Energy means you probably have at least some interest in dividends, and the company pays a good one.
As mentioned above, NextEra Energy has paid and raised its dividend for 30 consecutive years. The dividend payout ratio is a healthy 62% of 2025 earnings estimates, so there are no concerns about cuts here. The stock yields 3.4% at its current share price, and management expects to grow the dividend by 10% annually through at least 2026.
A dividend with growth and a high starting yield can be powerful for building long-term wealth. Investors who reinvest NextEra's dividends for many years can create a compounding juggernaut that eventually showers them with dividend income without needing to sell their shares.
4. Strong growth and total returns outlook
NextEra Energy plans to invest $120 billion in energy infrastructure over the next four years, which reiterates the growth opportunities ahead.
More specifically, management is guiding for earnings-per-share growth of 6% to 8% annualized through 2027. That could be conservative; management commented that it would be disappointed if it didn't achieve the high end of those projections or even outperform them. That means the company's planned dividend increases should not diminish the payout ratio.
The stock trades at a forward P/E ratio of 18, near its lowest since the start of 2023. It wouldn't call that a once-in-a-lifetime bargain for the growth you're getting, but it's very fair for a high-quality company. NextEra's growth and dividend payments could deliver double-digit annual investment returns if the broader market stays upright.
NextEra's potential returns, long growth runway, and steady business model make it an ideal stock for buy-and-hold investors.
Should you invest $1,000 in NextEra Energy right now?
Before you buy stock in NextEra Energy, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NextEra Energy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $561,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $606,106!*
Now, it’s worth noting Stock Advisor’s total average return is 811% — a market-crushing outperformance compared to 153% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of April 21, 2025
Justin Pope 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.
