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Why NextEra Energy Stock Gained 27% in 2020 and Is Headed Higher

By Neha Chamaria - Jan 8, 2021 at 12:59PM

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The utility fired on all cylinders last year.

What happened

Shares of NextEra Energy ( NEE 1.27% ) rallied 27.4% in 2020, according to data provided by S&P Global Market Intelligence. It was an eventful year for investors in the utility, as news of a megamerger floated even as NextEra Energy split its stock, grew its renewables portfolio substantially, and bumped up its medium-term outlook, setting itself up for a strong 2021.

So what

NextEra gifted shareholders with a dividend hike early in the year, increasing its dividend by 12%. The company also announced target annual dividend growth of around 10% through a least 2022, off a 2020 base. The COVID-19 pandemic hit soon after, but NextEra maintained its dividend goals.

A rising arrow on a stock price chart.

Image source: Getty Images.

NextEra delivered strong numbers through the year, growing its adjusted earnings by 12% during the nine months ended Sept. 30, 2020. In September, NextEra announced a 4-for-1 stock split and boosted its near-term earnings forecast, even extending its projection out to 2023. NextEra put out 2021 adjusted earnings range at $9.60 to $10.15 per share, or $2.40 to $2.54 per share adjusted for split, and projected 6% to 8% growth in earnings in 2022 and 2023 off 2021 EPS. CEO Jim Robo even said he'd be disappointed if the company can't "deliver financial results at or near the top end of our adjusted earnings per share expectations ranges in 2020, 2021, 2022, and now 2023." 

The forecast was backed by strong momentum in the renewable energy sector. In the third quarter, NextEra's renewables backlog crossed 15,000 megawatts, surpassing its existing renewables portfolio. Needless to say, that's the highest backlog the company has ever had in history. To finance its humongous development pipeline, NextEra put up assets worth $1.3 billion on the block later in the year to raise proceeds.

If that wasn't enough to excite investors, they were in for another surprise when NextEra Energy approached rival and the largest regulated utility in the U.S., Duke Energy, with a takeover offer, according to The Wall Street Journal. Duke rebuffed the offer, but the development reflected NextEra's hunger for growth -- it had just struck a $660 million deal to acquire GridLiance Holdco and GridLiance GP from The Blackstone Group.

Now what

If 2020 reinforced NextEra's position as the world's largest wind and solar energy producer, its guidance through 2023 has given investors great visibility into the company's future. The stock's rally in 2020, therefore, was perfectly justified, and investors will likely continue to bid NextEra shares even higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$89.15 (1.27%) $1.12
The Blackstone Group L.P. Stock Quote
The Blackstone Group L.P.
BX
Duke Energy Corporation Stock Quote
Duke Energy Corporation
DUK
$101.21 (1.33%) $1.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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