Diversification is important in investing. It spreads risk across multiple entities and can even lead to higher returns. Investing too much capital in one or two stocks can have devastating consequences, as we often don’t realize we’re traveling through our wealth-building journey with blinders on until it’s too late.
That said, if I could buy only one stock for the foreseeable future, it would probably be this renewable energy leader that doubles as the world’s largest publicly traded utility and has absolutely smoked the return of the S&P 500 since the turn of the century. As recent first-quarter 2019 earnings results demonstrate, the business is well-positioned for growth despite — and, actually, because of — its mammoth size…
The right mix of past, present, and future
NextEra Energy (NYSE: NEE) has grown from a market cap of $10 billion in mid-2001 to a market cap of over $91 billion today by riding major trends in electricity generation. Some are boring but noteworthy, such as a customer-centric focus on service reliability and keeping bills low. Others tend to grab the headlines, such as pouring tens of billions of dollars into renewable energy assets. Both have turned out well for shareholders.
For example, the company’s primary electric utility, Florida Power & Light (FPL), has expanded to serve over 5 million customer accounts and contribute 59% of NextEra Energy’s adjusted earnings per share last year. It owns over 24,000 megawatts of power generation and $53 billion in total assets, generates over $12 billion in annual revenue, and is the largest utility in the country ranked by megawatt-hours sold. The average FPL customer’s bill is 15% below the state average and 29% below the national average. The utility’s system experiences 36% less downtime than the state average.
Meanwhile, the company’s power generation arm, NextEra Energy Resources (NEER) was among the first to make a big, bold bet on wind power in the early 2000s. That has played a significant role in NextEra Energy’s rise in the last two decades, while simultaneously moving wind power from an also-ran in the nation’s energy mix to the lowest-cost source of electricity today.
Consider that wind power generated just 190 terawatt-hours of electricity for the United States in 2001 but a whopping 275,000 terawatt-hours in 2018, representing 6.5% of the country’s total electric output. NEER owns 15,000 megawatts of wind power today, representing 67% of its power mix and 15% of the country’s total installed wind power capacity. That also makes NEER the global leader in electricity generated from the wind. It was responsible for…
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