NextEra Energy (NEE 2.34%) recently reported solid earnings for the first quarter of 2024 and provided investors with an upbeat outlook for the future. The stock has rallied strongly over the past six months or so, which is great news for existing shareholders.
But is the stock worth buying today? That will depend a lot on how you view NextEra Energy's current (and future) performance. Here's what you need to know.
Next Era Energy posted good results
In the first quarter of 2024, NextEra Energy's adjusted earnings rose to $0.91 per share, up from $0.84 in the same part of 2023. That's a solid 8% gain, and somewhat uncommon for a utility. Both the company's regulated utility business, largely made up of Florida Power & Light, and its clean energy operations, known as NextEra Energy Resources, had good quarters, with net income per share up roughly $0.04 in each division.
Image source: Getty Images.
But the most compelling news from the company's earnings release was probably management's comment that it "... will be disappointed if we are not able to deliver financial results at or near the top of our adjusted earnings per share expectations ranges in each year through 2026, while maintaining our strong balance sheet and credit ratings." Basically, the company's strong results are on track with management's long-term plan.
That plan, meanwhile, calls for earnings growth of between 6% and 8% per year through 2026. And on top of that, management is saying that it will grow the dividend a hefty 10% per year through 2026 as well. These are both very material numbers for a utility, a sector that is usually known for slow and steady results.
Is NextEra Energy worth buying?
If you own NextEra Energy you should be pleased. That's particularly true if you stepped into the stock in late 2023 when share prices fell dramatically, pushing the dividend yield up toward decade highs of around 3.5%. In hindsight, that now looks like it was a huge buying opportunity.
NEE Dividend Yield data by YCharts
But since that price low point, NextEra Energy's stock has rallied strongly. Over the past six months, share prices have gained over 30%. It isn't nearly as compelling a purchase as it once was -- note that the forward dividend yield is now around 2.7%. While that's not a terrible yield for NextEra Energy, it is just average. And given that the average utility, using Vanguard Utilities Index ETF (VPU 1.85%) as a proxy, is yielding 3.2%, investors looking for income probably won't find NextEra Energy attractive at these levels.
But what if your dividend investing goals aren't focused on yield, but are instead focused on dividend growth? Well, you'll still be hard-pressed to find a utility that offers the dividend growth that NextEra Energy is promising investors. And notably, that growth is coming from two strong businesses, not just one. NextEra Energy is not just offering dividend growth, but that growth is built atop a uniquely diversified utility business.
Not for everyone, but ideal for some
At the end of the day, NextEra Energy isn't going to be the perfect investment for all investors. It is, at its core, a dividend growth stock. And if that's what you are looking for, then it is still worth a close look. Given the continuing strength of the business, and management's upbeat outlook, there's no reason to believe anything has changed about the long-term trajectory of the dividend.
