There is growing interest in the energy sector and according to the IEA estimates, there will be 600 TWh of additional electricity generated from solar each year. As countries work towards achieving a net-zero target, investment in the energy sector is growing. Smart investors know that now is the time to bet big on energy stocks. Two of the biggest utility companies in the country- NextEra Energy (NYSE:NEE) and Dominion Energy (NYSE: D) have invested millions to build a strong infrastructure and add more assets to their already-strong portfolio.
Utility companies are going to see a major rise in demand in the coming years, and they are both increasing assets to make the most of the demand. Both companies have made strategic acquisitions to expand their market share and grow their renewable portfolio. These two utility companies are playing a vital role in the energy sector in the country, and they’re both solid dividend-paying stocks, but which one is better? I’ll help you choose the stock that deserves a place in your portfolio.
Key Points
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Choosing between two dominant utility companies isn’t easy but one is better than the other.
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NextEra Energy and Dominion Energy are committed to rewarding shareholders but I’d place my bets on only one.
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NextEra Energy
The largest producer of wind and solar energy in the world, NextEra Energy has a wide portfolio of assets and has invested in clean energy solutions to meet the changing consumer demands. Its subsidiary, Florida Power & Light caters to millions of customers across the country with reliable electricity. This remains its major source of revenue. It has steadily invested in this business segment to ensure an uninterrupted energy supply.
NextEra Energy is expecting to achieve an earnings growth rate between 6% to 8% by 2027. The company aims to achieve this through the addition of renewable assets. It already has a backload of over 28 GW of signed contracts and aims to invest $25 billion in the next five years towards renewable energy operations.
In the recent quarter, the company reported a 9% year-over-year jump in operating revenue to $6.25 billion. The EPS was $0.40 per share and its subsidiary Florida Power & Light reported a revenue of $3.99 billion. Its renewable business saw a revenue of $2.16 billion while the net income dropped. For 2025, the company is expecting an EPS in the range of $3.45 and $3.70. In its renewable energy segment, NextEra Energy aims to add 36.5 to 46.5 GW of new renewables by 2027.
Exchanging hands for $66.88, NEE stock is down 6.61% year-to-date and 13.5% in six months. The company has enough cash to keep rewarding shareholders and the stock has a dividend yield of 3.39%. It aims to increase the dividend rate by 10% annually through 2026. The dividend aristocrat has raised dividends for 31 consecutive years.
Dominion Energy
A dominant player in the U.S. utility industry, Dominion Energy provides natural gas and electricity to consumers. The company has invested in solar, offshore wind, and battery storage projects. It aims to invest $12.1 billion in 2025 towards expanding its infrastructure and another $50.1 billion in the next five years.
D stock is trading for $54.38 and has remained flat year-to-date. It is up 6.31% in 12 months and is moving closer to the 52-week high of $61.97. It has a dividend yield of 4.91%. The company has cut dividends in the past when it revamped its portfolio and its current dividend is the same as 2024. Investors can get a higher yield but may have to wait to see dividend growth.
Dominion Energy sets itself apart from others by focusing on data centers. It operates in Virginia which has the highest concentration of data centers and considering the need for data processing, Dominion Energy has massive expansion potential.
It has connected about 450 data centers and is steadily improving infrastructure to meet the demand from this segment. With the growing demand for AI, there will be a higher demand for data center power in the coming years. This could reflect on the revenue numbers in the near term, and ultimately benefit investors in the form of higher dividends.
In the first quarter results announced today, Dominion Energy beat estimates and reported an EPS of $0.93. Its revenue came in at $4.08 billion. For 2025, the management is aiming for an EPS in the range of $3.28 to $3.52. It plans to upgrade the infrastructure by using grid devices and smart meters in addition to implementing a customer information platform that will enhance the consumer experience.
The verdict
While utility businesses are considered a fairly safe investment option, they suffer from market volatility. But if you are looking for a safe and reliable dividend stock, I’d recommend buying NextEra Energy. It is a diversified business with a strong foundation and an impressive backlog. The management is aiming for annual dividend growth and this can benefit investors who hold on to the stock.
The company has a robust portfolio and is financially stable. Both stocks have similar P/E ratios and they look expensive when compared to the industry average of 13.1X. While NEE is expensive and has a lower dividend yield, it looks attractive from the long-term perspective. D stock has a negative five-year return while NEE has generated a 17.85% return for investors in the same period. NEE can offer capital appreciation and dividend growth.
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