NextEra Energy Inc. (NYSE:NEE)

NextEra Energy (NYSE: NEE) - the future of large scale green energy production in the United States.


At People’s Capital, we believe NextEra Energy benefits from the expansion of the United State’s clean energy production.


Why we love NextEra Energy:


  • NextEra Energy provides energy (mostly electricity) to the United States. As societies advance, energy demand increases exponentially - so the demand for NextEra’s services will increase exponentially as well.

  • Profits and Revenue: NextEra reliably posted profits for the past 5 years, and grew profits from energy production from 2016-2019 (took a small 2.4% revenue reduction in 2020 due to Covid).

  • NextEra is the world's largest producer of wind and solar energy and is heavily investing in new sustainable energy infrastructure (50-55 Billion dollars by 2022)

  • Addressing Climate change and increasing clean energy production is a major part of the Biden Administration’s agenda, and as the leading producer of solar and wind, NextEra is the logical choice for government contracts to construct sustainable energy infrastructure.

  • Pays a respectable dividend of 1.67%

Risks

  • NextEra is one of many companies in the stock market with very high valuations. If a market-wide correction occurred, NextEra would be exposed to a significant reduction in share price.

  • A negative development in the fight against Covid could adversely affect the share price of NextEra in the short term.

Renewable, or “green”, energy is the future of domestic and global energy production. Climate change is part of the drive to transition to renewables. However, eventually, the global fossil fuel supply will be exhausted, which means renewable energy solutions must be developed for our society to survive as we know it. NextEra Energy - one of the largest energy companies in the world with the drive and resources to develop renewable energy infrastructure - is situated perfectly to capitalize on this transition in energy production.


At a fundamental level, NextEra is in an incredibly strong position. As societies become more advanced, the demand for energy increases exponentially. As one of the largest energy companies in the world, NextEra is primed to meet the growing demand for energy in the United States and abroad. In the short term, NextEra’s location in the Southern United States is also advantageous for growing energy supply. The south has several areas of population and industry growth which both require an increasing supply of energy.


NextEra’s fundamentals as a business are also strong. They have reliably produced profits for the past five years. Furthermore, the company has consistently grown its cash flow from operations and increased its top-line profit before Covid. Even with the Pandemic, NextEra only took a 2.4% reduction in sales. Investors can count on NextEra to produce profits and sales growth for the foreseeable future.


NextEra is also continuing to invest in their own future - the company has committed to building 50-55 billion dollars worth of energy infrastructure in the United States by 2022. Based on the company’s past performance and the growing demand for energy in the United States, NextEra’s continued expansion of energy-producing assets suggests that the company will increase revenue in the future.


Addressing climate change is at the forefront of the Biden administration's agenda. As the world leader in wind and solar energy production, NextEra is primed and ready to take advantage of Biden’s desire to spend large sums of money on developing sustainable energy infrastructure.


NextEra Energy also pays a respectable dividend at 1.67%. While not as large as some other utility companies, NextEra provides real growth potential and the relative safety of strong fundamentals to complement its dividend payments.


An investment in NextEra Energy does pose some risks. The stock market is currently at all-time highs, and NextEra is one of many companies that have very high valuations. In the event of a market-wide correction, which is likely to occur at some point in the future, NextEra would be exposed to a reduction in share price. Furthermore, in a world still struggling with the Covid-19 pandemic, negative news can have a large impact on the markets.


At People’s Capital, we believe the upside of NextEra’s expanding renewable energy production outweighs the potential downside of a market correction, and on a 3-5 year timeline, an investment in NextEra energy should be profitable.


Best,

The People’s Capital Team



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