NextEra Energy as Dividend Investment

Unless you’ve been sleeping under a rock, you are aware of the concept of cord cutting. 

Cord cutting is most common in the disruption of large media companies by people cutting their cable TV subscriptions. Next to cigarette companies, cable companies probably have the worst reputations ever for customer service and satisfaction. People hate their cable companies… And any opportunity to get back some control, save money and gain freedom is welcome by consumers. Consumers are increasingly cord cutting by shifting to on-demand media that they can get from any Internet connected device.

Another area where cord cutting is happening is in utilities. Cheap natural gas is replacing dirtier coal, and utility companies are being disrupted because more and more people want the opportunity to go “off grid” by using solar energy and large backup batteries to power their homes. Wind energy is becoming big business even in traditionally “red” states such as Texas. 

As such, utilities are repositioning themselves as “green energy” companies. Indeed, Connecticut Light & Power (aka CL&P) rebranded as “EverSource” and markets its renewable energy efforts heavily, while also doing its best to stanch the bleeding from the encroachment of solar energy. 

Regardless of whether they enjoy being disrupted, utilities are not investing in renewable energy to save the planet, even if that’s a great byproduct of their efforts. Utilities are preparing for a seismic shift in how we buy and use cleaner power. And they are learning that they can profit by investing billions of dollars to make sure they don’t go the way of the T-Rex.

Profit from Doing Good

As the world’s largest producer of solar and wind energy, NextEra Energy is a stock to consider for sustainability minded stock pickers. NextEra Energy is also a solid dividend growth stock with an average annual dividend increase of 8.5% since 2005 and a targeted dividend growth of 12-14% through 2018 and possibly beyond. In the process, by restructuring itself from fossil fuel energy to renewables, NextEra Energy is reducing greenhouse gas emissions to the tune of millions of tons of CO2 that would otherwise be headed into the atmosphere.  

The company’s sustainability emphasis has a growth plan rooted in renewable energy. Over the next 3-4 years, NextEra Energy is expected to invest $40-44 billion by building 10,100-16,500 Megawatts (MW) of wind and solar renewable energy projects. NextEra Energy also is the parent company of Florida Power & Light (FP&L) which is investing $2.8 billion in solar energy through the same period. Another subsidiary of NextEra Energy is NextEra Energy partners, a “yieldco” that pays a strong dividend from annual cash flows from renewable energy assets it acquires from NextEra Energy Resources and other third parties. The company believes that these investments will result in increased earnings per share (EPS) of 6-8% compounded annually through 2020.