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Should Utility Investors Consider NextEra Energy?

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Part 2
Should Utility Investors Consider NextEra Energy? PART 2 OF 13

NextEra’s Total Returns Surpass Returns of Other Utility Giants

NextEra Energy’s total returns

Renewables leader NextEra Energy (NEE) is also a frontrunner in total shareholder returns among peers. It has been outperforming peers and even broader markets by a huge margin. In the last five years, NextEra Energy returned 18% compounded annually.

We have considered stock appreciation and dividends paid during a specific period to calculate total returns.

NextEra’s Total Returns Surpass Returns of Other Utility Giants

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Peers lagged behind

In comparison, Duke Energy’s (DUK) and Southern Company’s (SO) annually compounded total returns in the last five years stand at 8% and 4.3%, respectively. Total returns of the Utilities Select Sector SPDR (XLU) came in at 11% in the same period. The SPDR S&P 500 (SPX-INDEX) (SPY) has returned 15% in the last five years.

NextEra Energy’s returns beat peers in all of the time horizons we have considered in the above chart. Its returns were the result of a healthy combination of stock appreciation along with strong dividend growth. The Florida-based utility posted stronger dividend growth in the last ten years than most other utilities. Its consistent performance in the last few years makes it an attractive stock among peers going forward. We’ll discuss NextEra Energy’s dividend profile in detail in a later part of this series.

Utilities’ performance in the recent past

US utility stocks have rallied in the last few years, and consistent dividend growth in this period contributed to healthier total returns. In the last one year, utilities at large returned 2.4%, lagging behind broader markets by a huge margin. US utility stocks started correcting last month likely on concerns relating to higher valuations and the possibility of higher interest rates.

To know more about US utilities and where they might head going forward, read US Utilities: Ongoing Weakness Could Be Temporary.

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