The Top Utility Stock Could Double Your Money, Says The Motley Fool

Key Highlights of NextEra Energy

NextEra Energy stands out as the largest utility by market capitalization, with a valuation exceeding $150 billion. This places it over $30 billion ahead of its closest competitor. Despite its already substantial size, the company is positioned for significant growth in the coming years. The combination of its expanding electric utility operations and robust renewable energy initiatives has driven its success, and there are strong indicators that this momentum will continue.

A Strong Track Record of Growth

NextEra Energy's rise to the top of the utility sector has been fueled by several strategic moves. One of its core strengths lies in Florida Power & Light (FPL), which serves over 6 million customers and is the largest electric utility in the United States. FPL has benefited from Florida’s growing population and its abundant sunshine, allowing the company to invest heavily in electricity generation capacity. Additionally, FPL has developed one of the largest solar energy portfolios in the country, helping to keep costs low while supporting increased demand.

On the renewable energy front, NextEra Energy Resources has capitalized on rising demand for clean power from both utilities and large corporations. This segment now manages about 38 gigawatts (GW) of power generation and storage assets, along with electricity transmission lines and natural gas pipelines. These assets position NextEra as one of North America’s leading energy infrastructure companies.

The company’s financial performance reflects its strong operational foundation. Since 2007, NextEra has achieved an 8.3% compound annual adjusted earnings-per-share growth rate. This has supported nearly 10% compound annual dividend growth over the same period. Combined, these factors have led to total returns of 8.9% annually over the past 20 years—more than double the average return of its peers.

Future Growth Potential

NextEra Energy is poised for continued growth, with a plan to invest $120 billion in U.S. energy infrastructure over the next four years. This level of investment positions the company as the top energy infrastructure investor in the country. These projects are expected to generate predictable returns through government-regulated rate structures and long-term contracts.

Based on this investment strategy, NextEra anticipates maintaining its adjusted earnings per share growth at or near the top end of its 6% to 8% annual target range through at least 2027. The company also expects around 10% annual dividend growth through next year. With a current dividend yield of about 3%, and an estimated earnings growth of 8% annually, NextEra could deliver an 11% average annual total return over the next several years.

At this rate, investors could see their money double in as little as six and a half years. This projection assumes the company can maintain earnings growth near the upper end of its target range beyond 2027. Given the expected surge in U.S. power demand—projected to increase by 55% by 2040—this seems reasonable. Factors such as data centers, transportation electrification, and manufacturing onshoring are driving this demand.

Renewable Energy Leadership

Renewable energy is expected to play a central role in meeting this increased demand. With its cost advantages and rapid deployment capabilities, renewables are likely to supply most of the new power-generating capacity needed. As a leader in renewable development, NextEra Energy is well-positioned to capture a significant share of these new projects.

Combined with the continued growth of FPL, driven by Florida’s expanding population and increasing solar installations, NextEra Energy is set to deliver above-average earnings growth for years to come.

A Strong Position for Long-Term Investors

NextEra Energy’s substantial investments in renewable energy have solidified its position as the largest utility stock by market cap. Its ability to capitalize on surging power demand and its strong track record make it an attractive option for long-term investors. While the company may not be included in every stock recommendation list, its fundamentals and growth potential suggest it remains a compelling choice for those looking to build a diversified utility portfolio.