With a roughly $100 billion market cap, NextEra Energy (NEE -0.42%) is one of the largest utilities in the United States. It's managed to grow so large by getting a lot of things right. But is this industry-leading electric utility worth buying today? Answering that question requires a look at both the company's execution and its valuation.

Winning ways

NextEra Energy owns the largest regulated electric utility in the United States, Florida Power & Light. This business serves over five million customers in the Sunshine State. It recently added Gulf Power to the mix as well, serving another 460,000 customers in northwestern Florida. The company's customers pay 30% less for energy than the national average in a state that's expected to grow its population by as much as 20% by 2030.

A man with blueprints and high voltage power lines behind him

Image source: Getty Images

That combination should give NextEra plenty of room to live up to its projections of 6% to 8% earnings growth. New customers will require additional investment, and low costs should keep regulators happy, leading to easy rate case approvals. At this point NextEra expects capital spending to range between $12 billion and $14 billion a year through 2022.

Those numbers, however, are across its entire business -- in addition to its regulated operations in Florida, NextEra is also one of the largest clean energy providers in the world through its Energy Resources division. NextEra Energy Resources generates over 24 gigawatts of power, which it sells largely under long-term contracts to others. Roughly two thirds of that generation is wind, with solar pitching in another 10% or so (the rest is a mix of nuclear, natural gas, and oil). It has an additional 11 gigawatts' worth of power projects that it expects to build, further expanding its already impressive scale.

Taken together, the regulated and non-regulated businesses will not only provide impressive earnings growth, but also huge dividend growth, with near-term projections of 12% to 14% dividend growth through at least 2020. (Increasing the company's currently modest payout ratio will help to make up the difference between projected earnings growth and projected dividend growth.)

And, to top it all off, NextEra Energy has a rock-solid financial foundation. The company is investment-grade rated, with a debt to EBITDA ratio below that of most of its closest peers, and the utility's solid balance sheet suggests that it will have little trouble supporting its impressive growth plans. Although nobody can predict the future, it's a solid bet that NextEra grows earnings by its targeted 6% to 8%, and increases dividends as planned by 12% to 14%.

But is it a buy?

Clearly, there's a great deal to like about NextEra's business. But, to paraphrase Benjamin Graham (the man who helped teach Warren Buffett how to invest), even great companies can be bad investments if you pay too much for them. To put it bluntly, Wall Street is well aware that NextEra Energy is among the best-run utilities in the United States.

For one thing, the yield on NextEra's stock is a miserly 2.4%. That's below the utility-group average of around 2.9%, as measured by Vanguard Utility ETF, and much lower than the dividends of many of its similarly-sized peers. The yield is also near the lowest levels in the company's history. Income investors, which are normally attracted to utility names, won't find much to like here unless they are focusing more on dividend growth than current income.

NEE Dividend Yield (TTM) Chart

NEE Dividend Yield (TTM) data by YCharts

NextEra's price to earnings ratio, meanwhile, is a lofty 30 times after the company's nearly 25% stock price advance over the past year. Its five-year average P/E is around 18. And that's just one valuation metric -- price to sales, price to book value, and price to cash flow are also elevated relative to their longer-term averages. In other words, investors appear to be pricing in a lot of success today. Value investors won't be too interested here, either. While growth-oriented investors might find NextEra interesting, utilities aren't usually on the growth-stock radar screen. 

Tread carefully

NextEra is a very well run utility with huge opportunities ahead of it as it expands in growing markets (both on the regulated front and within the renewable power space). Wall Street, however, is well aware of the company's successful past and future growth potential.

Most income investors should probably look at higher-yielding utility names before jumping on NextEra -- there are plenty of good alternatives in the utility space. That said, dividend growth investors might still want to take a deep dive. Few utilities can grow dividends in the low double digits, and that might be enough to entice more aggressive types to overlook NextEra's rich valuation. Just know what you are buying into before you pull the trigger -- NextEra is not cheap.