NextEra Energy was once the clean and innovative center of the Southeast’s utility grid. And they still are. But over the last year, the stock market has repriced the value of NextEra Energy stock (NYSE: NEE). Prior to 2023, NextEra stock typically fetched a valuation premium over similar utilities because of a perceived higher growth rate on earnings as well as stability of earnings generation. Thus, as depicted below, throughout most of 2018-2022, NextEra stock had a higher price-to-book-value valuation that the other major utilities in the area.   Source: [...]

NextEra Energy is selling off today, September 27th with a couple of news items in the headlines. Source: Factset Database, September 27, 2023 First, NextEra plans to sell Florida City Gas to Chesapeake Utilities Corporation (CPK) for $923 million in cash. NextEra will realize a gain on sale that should be immediately accretive to earnings and reduces debt loads by $145 million. Florida City Gas was an asset included in the Florida Gulf Power deal from Southern Company back in 2019. from This deal is expected to close over the [...]

Institutional investors have invested in NextEra Energy stock (NYSE:NEE) over the last decade because of the low volatility investors get from utilities, the population growth rate in Florida, and Next Era’s consistent dividend growth rate of around 10% per year. Unfortunately, that can also mean that share prices of Next Era got expensive as companies which offer low volatility and consistent growth were bid up by investors. For example, Next Era’s dividend yield (blue below) was consistently above 3-3.5% in the recovery following the financial crisis. But that yield steadily [...]

Most utilities in the public space struggle to consistently generate free cash flow from operations. This means that they typically spend more cash than they generate in sales. Whether they spend it through typical yearly expenses or in capital expenditures designed to generate higher future cash, most utilities struggle to put cash in the bank year over year. To make up the difference, these companies can either raise cheap debt with help from the government or issue stock. For most publicly traded companies, this would be catastrophic to the stock [...]