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Why Now Is the Perfect Time to Invest in NextEra Energy, a Dividend Aristocrat

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This article was cowritten with Dividend Sensei.

For the past five years, NextEra Energy (NYSE:NEE) has been overpriced and not a wise investment opportunity. However, things have changed, and now is the best time in half a decade to buy this dividend aristocrat.

NextEra Energy, also known as Florida Power & Light (FPL), is a leading green power company. It owns a significant amount of power generation capacity, including renewable energy sources like solar and wind. The company has ambitious plans for future growth and aims to transition its baseload power to renewables.

Despite being undervalued by about 15%, it’s important to approach investing in NextEra Energy with realistic expectations. While it offers solid potential for long-term returns, it’s not a guaranteed blockbuster investment. However, for investors seeking steady growth in the green energy sector, NextEra Energy is definitely worth considering.

Overview of NextEra Energy

Founded in 1925, NextEra Energy started as Florida Power & Light and has since grown to become a dominant player in the green power industry. The company is divided into two parts: Florida Power & Light (FPL) and NewEra Energy Resources (NEER).

FPL, the regulated utility, has millions of customers and a substantial amount of power generation capacity. NEER, on the other hand, focuses on renewable energy projects and has a strong presence in the renewable power market.

NextEra Energy has significant expansion plans for its regulated business. It aims to invest $33 billion by 2025 to support Florida’s economic growth and transition its power generation to be 83% solar, battery, and hydrogen, with 16% nuclear by 2045.

Already a leader in green energy, NextEra Energy plans to add over 41 GW of new capacity, more than doubling its renewable power capacity by 2026. This ambitious growth strategy positions the company as a key player in the transition to a clean energy future.

Reasons to Invest in NextEra Energy

1. Strong Growth Potential

NextEra Energy has delivered impressive growth over the years, with annual returns averaging 17% compared to the S&P 500’s 9-10%. While future growth may not reach the same levels as in the past, the company still offers a solid potential for long-term growth, especially in the green energy sector.

2. Leading in the Green Energy Market

NextEra Energy is a major player in the green energy market, producing a significant portion of the wind power in the US. The company has aggressive growth plans for renewables, including solar and wind, which positions it to take advantage of the global shift towards clean energy.

3. Solid Risk Management

NextEra Energy has a strong risk management profile, ranking in the 54th percentile globally. The company has a history of effectively managing challenges, such as interest rate fluctuations and regulatory changes. However, it’s important to note that no investment is without risks, and investors should carefully consider their own risk tolerance.

Investment Considerations

While NextEra Energy presents a promising investment opportunity, it’s crucial to approach investing with realistic expectations. Here are some important points to consider:

1. Not Guaranteed to Reach Record Highs

While NextEra Energy has been a top-performing stock in the past, it’s unlikely to experience immediate record-breaking growth. The current state of the utilities sector and the potential for rising interest rates may limit short-term gains.

2. Steady Growth, Not Explosive Returns

Investing in NextEra Energy can provide steady growth over the long term. However, it’s not a stock that promises explosive returns. Investors should have reasonable expectations and not chase short-term gains.

3. Evaluate Your Investment Objectives

Before investing in NextEra Energy or any other stock, it’s important to evaluate your investment objectives and risk tolerance. Consider your long-term goals and whether NextEra Energy aligns with your investment strategy.

Conclusion

NextEra Energy presents an attractive investment opportunity in the green energy sector. While it’s not expected to reach record highs immediately, the company offers solid potential for steady growth over the long term. Investors should approach investing in NextEra Energy with realistic expectations and evaluate their own investment objectives and risk tolerance.

Note: This article is intended to provide general information and should not be considered financial advice. Always do your own research before making any investment decisions.

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