Shares of large U.S. utility NextEra Energy (NYSE: NEE) rose just shy of 17% in July according to data from S&P Global Market Intelligence. Through the first seven months of the year, the stock was up nearly 16%. That handily beat the average utility, using the Vanguard Utilities ETF as a proxy, which was down around 7% over that span.
NextEra has long been something of a growth story in the historically slow and boring utility sector. Its business is a mix of a typical utility (it owns the largest electricity provider in Florida) and a contracted renewable power business (it is among the largest owners of solar and wind power assets in the world). So it has a strong foundation to support an in-demand growth business.
The biggest indications of the success NextEra has achieved is its 26-year streak of annual dividend increases and the 10% annualized rate of dividend growth over the past decade. Those are impressive numbers for any company.
Although COVID-19 has been a headwind for most companies, NextEra's business has continued to push forward without missing a beat. Earnings in the second quarter, which were reported in the second half of July, showed that the company's bottom line increased 11% year over year. It has continued to integrate a recent acquisition, pushing the cost structure of that business lower and, thus, profitability higher.
And it is making solid progress on the largest construction program in the company's history, with 14.4 gigawatts of renewable-power construction projects in its backlog. NextEra continues to project 12% dividend growth in 2020, with 10% growth in 2021 and 2022.
NextEra Energy's stock is never cheap, because it has been such a great growth name in the historically boring utility space. The fact that it hasn't skipped a beat during the COVID-19 pandemic has basically resulted in the shares outperforming the broader industry by an even greater margin.
While value investors probably won't be interested here, dividend growth investors might want to take a look. Just go in knowing you'll be paying up for the stock, which has a very low yield by utility standards of just 2% or so, not much more than you would get from an S&P 500 Index fund.
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