Dear Mr. Berko: My wife, my three youngsters and I may move to Miami. I've been offered two positions at 35 percent more than I'm making now, but we're reluctant to move because we'll be so far from both our parents and family members. But believe it or not, we're both die-hard Dolphins and Marlins fans (long story), which would make the move more tolerable. What can you tell me about NextEra Energy, which is one of the two companies that might hire me? I might even buy 100 shares for my individual retirement account.
LP, Oklahoma City
Dear LP: NextEra Energy is one of the best “foreign” utilities I know of. In another lifetime, long, long ago, it was called Florida Power & Light. NextEra Energy (NEE-$80) serves 9.2 million people in a fast-growing 27,600 square-mile service area, encompassing southeastern Florida — where Spanish is often the preferred form of communication, the schools stink and the crime rate is off the charts.
But in 2005, you could have bought 100 shares of NEE at $40. That year, NEE earned $2.32 a share and traded at a price-earnings ratio of 19-to-1, and its $1.42 dividend yielded 3.2 percent. This year, NEE expects to earn $4.95 a share — more than twice what it earned in 2005 — trade at a 16 P/E and pay a $2.64 dividend yielding 3.2 percent, almost twice its cash payout in 2005. And some NEE enthusiasts believe that the board will recommend a 2-for-1 split early in 2014.
So recognizing that the Florida regulatory climate is over-friendly, it's reasonable to reckon that by 2018, NEE could grow revenues 5 percent annually, to $17.8 billion, and that both earnings and dividends could compound 7 percent, to $6.55 and $3.65, respectively.
NEE's nonregulated energy business, NextEra Energy Resources, or NEER, provides almost 50 percent of NEE's operating profits. NEER is the largest wind power producer in the U.S., with 2,100 megawatts of capacity in the U.S. and Canada. NEER is also on line to produce 925 megawatts of solar capacity by 2015 and owns a fleet of nuclear and fossil fuel power plants throughout the country. NEER owns some of the most desirable wind generation sites in the U.S., and its large, diversified generation capacity creates impressive advantages of scale and flexibility over its many smaller competitors.
Some believe that NEE may spin off this asset, which could impressively improve shareholder value. And there's also talk that NEE will invest $1.55 billion in a joint venture with Spectra Energy (SE-$34) to build a gas pipeline from Alabama to Florida. The completion date should be in late 2017, and NEE would be able to earn a sweet, federally regulated return of 10.5 percent on its investment.