The utility stock soared in October. Has it paid off for investors?
Stockholders of electrical utility NextEra Energy (NEE 0.08%) were feeling juiced this fall as shares of the massive power generation company surged more than 20% between mid-September and late October. That’s better than the S&P 500 has done all year!
But NextEra has had plenty of disappointing months in its recent past. Does this one-time surge make up for years of underperformance? Here’s what investors need to know.
Image source: Getty Images.
One year: Close but not quite
Investors who bought NextEra stock on Dec. 1, 2024, had some immediate disappointment, as their shares almost immediately tumbled 10%. In fact, NextEra’s stock spent most of the year underwater, until the autumn surge propelled shares skyward. Now those same stockholders are looking at a 7.8% return for the year, or a 13.1% return if you factor in reinvestment of the company’s dividend, which currently yields about 2.1%.
However, the broader market, as measured by the S&P 500, has gone up by 13.1%, not including reinvested dividends. If you do factor those in, the market is up 15% for the year, beating NextEra’s share price performance, but not by much:
Today’s Change
(-0.08%) $-0.07
Current Price
$84.58
Key Data Points
Market Cap
$176B
Day’s Range
$84.25 – $85.28
52wk Range
$61.72 – $87.53
Volume
4.1K
Avg Vol
9.9M
Gross Margin
36.09%
Dividend Yield
2.68%
Are things still close for investors who bought in three or five years ago?
Three and five years: Ouch!
An investment in NextEra from three years ago (Dec. 1, 2022) is losing badly to the market. In fact, without counting dividends, it’s down by 0.8%. The dividends turn that loss into a slight win, with an 11.2% return, but it’s still far from ideal, especially considering the S&P 500’s return is 67.2% on an absolute basis and 75.3% on a total return basis, meaning NextEra stock trails the market’s return by more than 60 percentage points.
The five-year picture isn’t much better for the company. On an absolute basis, it’s still badly trailing the S&P 500, 15.1% to 88.3%, and dividends don’t close that 70-plus percentage point gap, with NextEra’s 33.2% return badly trailing the S&P 500’s 103.6% return.
A rough patch for the stock
The last five years have been rough for NextEra’s shares … and its shareholders. Compare that to the prior five years (Dec. 1, 2016, to Dec. 1, 2020), when NextEra’s total stock returns absolutely destroyed the S&P 500’s, 237.6% to 94.6%. In fact, NextEra’s shares did so well over that period that investors who bought in 10 years ago are still looking at market-beating returns, despite the recent underperformance.
Like many other utilities and dividend stocks, NextEra Energy is an investment that tends to follow a “slow and steady” path to investing success, rewarding long-term investments much more than short-term ones.
