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NextEra Energy (NEE) is an electric utility company that operates in North America. Its former name was FPL Group. The company also produces electric from wind and solar power. At the end of 2010, NextEra Energy had 43,000 megawatts of generating capacity; 2% hydro and solar, 13% nuclear, 13% oil and coal, 19% wind, and 53% natural gas. The company is a member of Dow Jones Composite as well as Dow Utilities. Besides the energy production business, NextEra also leases fiber-optic network capacity and and dark fiber lines to telecommunication companies. Here is a summary of 10 year income statements along with dividends:

Income Statement - 10 Year Summary (in $ Millions)

Sales

Total Net Income

EPS

Dividend

2001

$9.630

$781

$2.31

$0.56

2002

$8.217

$695

$2.01

$1.16

2003

$8.173

$893

$2.51

$1.2

2004

$16.410

$896

$2.48

$1.3

2005

$15.710

$901

$2.34

$1.42

2006

$15.263

$1.281

$3.23

$1.5

2007

$11.846

$1.312

$3.28

$1.64

2008

$10.522

$1.639

$4.07

$1.78

2009

$15.643

$1.615

$3.97

$1.89

2010

$15.317

$1.957

$4.74

$2

While the revenues are more or less stabilized since 2004, total net income is in an increasing trend, and reached the highest value of $1.957 billion by 2010. Between 2004 and 2010 the company experienced the lowest revenue of $8 billion in 2008. It is interesting to see an electric utility company deeply affected from the financial crises in terms of revenues. However, the profits never declined, and they have been going up since 2001.


NextEra Energy pays dividends regularly since 2001. Dividends increased by almost 4-fold from the 2001 value of $0.56 to $2 in 2010. It looks like a company policy to increase dividends by at least 10% every year. EPS varies between years. There have been slight downsizes, but the increasing trend in EPS is obvious during the last decade.

Balance Sheet - 10 Year Summary (in Millions)

Current Assets

Current Liabilities

Long Term Debt

2001

$17.463

$11.222

$4.858

2002

$23.185

$16.569

$5.790

2003

$26.935

$19.963

$8.723

2004

$28.333

$20.796

$8.027

2005

$32.990

$24.429

$8.039

2006

$35.822

$25.892

$9.591

2007

$40.123

$29.388

$11.280

2008

$44.821

$33.140

$13.833

2009

$48.458

$35.491

$16.300

2010

$52.994

$38.533

$18.013


When we look at NextEra’s current assets, we see a rapidly increasing trend. The current assets increased by almost 3-fold in the last 10 years. That is approximately an 12% current asset growth rate. The highest current asset increase is observed between 2001, and 2002. Current liabilities have always been lower than current assets, and the positive gap between the two is widening at a 2010 value of $14 billion. Long term debt is also on an increasing trend. By the year 2010, long term debt reached $18 billion. However, the ratios of long-term debt to current assets/liabilities have been very stable.

Avg P/E

Net Profit Margin (%)

2001

12.5

9.5%

2002

14.3

8.5%

2003

12.4

9.3%

2004

13.5

8.5%

2005

17.8

7.6%

2006

13

8.2%

2007

18.8

8.6%

2008

14.5

10%

2009

13.4

10.3%

2010

10.8

12.8%

Average P/E ratio reached the highest value of 18.8 in 2007. The 2010 P/E ratio of 10.8 is the lowest in the last 10 years. Net profit margin also varies between years. Best net profit margin is observed in 2010, with 12.8, and worst net profit margin is observed in 2005, with 7.6.

Competitor Analysis

NEE

PGN

SO

TE

Market Cap:

24.72B

14.03B

34.04B

4.11B

Employees:

14,690

11,000

25,940

4,233

Qtrly Rev Growth (yoy):

-13.50%

0.60%

-3.50%

-12.70%

Revenue (ttm):

14.83B

10.19B

17.31B

3.37B

Gross Margin (ttm):

37.91%

35.77%

35.81%

50.20%

EBITDA (ttm):

4.74B

3.14B

5.64B

901.60M

Operating Margin (ttm):

18.42%

20.16%

21.57%

17.38%

Net Income (ttm):

1.67B

860.00M

1.90B

233.30M

EPS (ttm):

4.02

2.95

2.25

1.09

P/E (ttm):

14.58

16.22

17.83

17.52

PEG (5 yr expected):

2.35

3.91

2.83

1.97

P/S (ttm):

1.66

1.37

1.96

1.22

Yahoo Finance suggests Progress Energy, Southern Company, and Teco Energy as direct competitors. As one can see from the table above, NextEra’s gross and net profit margins are more or less in line with the competitors. NextEra’s most powerful competitor in industry is The Southern Company with a market cap of $34 billion and operating margin of 21.27%. Southern Company’s revenues are greater than that of NextEra by $3 billion. Due to the cyclical behavior of energy demand all electric producers suffered a negative quarterly earnings growth. Quarterly revenue growth of NEE was -13.50% in the last quarter. However, it has the lowest current P/E of 14.6.

Summary

NextEra is a stable profit maker. The company is growing in parallel to the demand for electricity. The management is in line with shareholder interest as it pays increasing dividends on a regular basis. The profits have also been steadily increasing. The Obama administration just approved a $53 billion injection for high speed rail. Once established, these railroads might replace highways as the nation’s favorite long-distance travel method. That will surely boost the demand for electricity, which is used by high-speed train networks. With a current P/E ratio of 14.61, and forward P/E ratio of 12.40, NextEra is fairly priced for a 10% growth rate. Following the 10% growth policy, quarterly dividends also increased to 55 cents this year. While NextEra will not make you rich, it can provide a stable source of dividend income. This is why it is a dividend stock pick for the next 5 years.

Source: NextEra Energy: A Dividend Stock Pick for the Next 5 Years