Electricity demand in the U.S. has meandered along for the past couple of decades. It has only increased by about 9% as energy efficiency gains helped offset demand growth.
However, the outlook for the next 20 years is much more bullish. Forecasters expect power demand to surge 55%, about 6 times faster than it has grown over the past two decades. Demand catalysts include artificial intelligence (AI) data centers, the onshoring of manufacturing, the electrification of everything, and growing commercial, residential, and industrial electricity usage.
Few energy companies are in a better position to capitalize on the coming power boom than NextEra Energy (NYSE: NEE). It’s the undisputed leader in the utility sector. Because of that, it’s in an excellent position to grow its business and shareholder value in the coming years, making it a must-own energy stock to cash in on this megatrend.
NextEra Energy’s CEO, John Ketchum, discussed the massive scale of the company’s business on its recent fourth-quarter conference call. He highlighted:
FPL (Florida Power & Light) is the largest electric utility in the U.S., and Energy Resources is the world’s leader in renewables and storage. Together, we operate the largest natural gas-fired generation fleet in the country, are one of the largest nuclear operators in the U.S., and are widely viewed as an industry leader in transmission. We are one of the top five infrastructure investors in the United States, and we have invested more than $150 billion in our nation’s energy infrastructure over the last decade, building everything from nuclear uprates, natural gas pipelines, and natural gas-fired generation to battery storage and renewables.
The heavy investment in growing its clean energy infrastructure has paid big dividends for the company’s shareholders. Ketchum noted on the call: “Since 2021, we have delivered compound annual growth in adjusted EPS of over 10%, which is the highest among all top 10 power companies. In fact, if you look over the last five, 10, 15, and 20 years, you will see the same absolute and relative performance.”
The utility hasn’t just squeaked by its rivals in the power sector; it has pulverized their performance. It has grown its adjusted earnings per share (EPS) by more than double the rate of its peers over the past 20 years (8.9% versus 3.8%). That has given it the power to grow its dividend at a 10% compound annual rate during that period. This growth has helped it produce superior total returns (15.7% annualized compared to 9.8% for the average utility and 10.2% for the S&P 500).
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