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1 Profit-Pulling Utility Ready for 2013

Justin Loiseau
December 4, 2012

As New Year's Eve quickly approaches, and we all prepare to make our 2013 investing resolutions, now is a good time to reflect on the energy sector in year that was 2012.

In this December series, our writers will be recapping some of the most popular, highest-performing stocks in this sector. We will examine whether the gains these companies provided their shareholders in 2012 are sustainable, or whether they merely can be attributed to one-time events or fizzling trends.

Consider these pieces as gifts to benefit our Foolish, long-term investors seeking exposure to the energy sector. Enjoy, and Fool on!

Go green
If you invested in NextEra Energy (NYSE: NEE  ) this year, now's the time to give yourself a pat on the back for its 21% annual return. That beats the S&P 500 (INDEX: ^GSPC  ) and knocks the Dow Jones Utility Index's 1% gain out of the ballpark.

NEE Chart

NEE data by YCharts

Here are three reasons why NextEra is winning, as well as why buying now might be the best present Santa has on offer.

1. Natural gas
Whether you think it's clean or not, there's no denying that plummeting natural gas prices have helped this stock soar. Of NextEra's 41,000 MW of generating capacity, a wholesome 24% of that electricity comes from natural gas. The first six months of 2012 saw a 40% drop in wellhead prices, and only recently has demand started to push prices up again.

US Natural Gas Wellhead Price Chart

US Natural Gas Wellhead Price data by YCharts

2. Squeaky clean energy
Natural gas ain't nothing when compared to NextEra's clean energy offerings. Its 2011 wind capacity amounted to approximately 21,000 MW, or almost double Dynegy's (NYSE: DYN  ) total capacity. As the largest generator of U.S. solar energy, NextEra's not just full of hot air, either.

Source: NextEra 10-K 

Here's the regional breakdown of the NextEra's wind and solar operations (shown in green and yellow, respectively):


Duke Energy (NYSE: DUK  ) and Exelon (NYSE: EXC  ) aren't letting NextEra have all the fun, and are also ramping up their own (sort of) clean energy sources. Duke touts "clean coal," while Exelon has loaded up on nuclear.

3. A dividend that won't die
Let's face it, the utilities sector is not the most exciting, and power company investments often have more to do with dividend yields than growth stories. But NextEra has managed to defy industry norms by wooing investors with an average dividend, a sustainable payout ratio, and the sort of futuristic promises that only a 50% wind energy company can offer. Let's see where it stands:


Dividend Yield

Payout Ratio

Debt-to-Equity Ratio





National Grid (NYSE: NGG  )




Duke Energy




First Energy (NYSE: FE  )




Southern Company (NYSE: SO  )




Dominion Resources (NYSE: D  )




Northeast Utilit