NEE
NEE
Hold 2026-05-05
Model
DDM
Price at Report
$95.51
Base IV
$98.29
Bear IV
$86.28
Bull IV
$108.73
Entry Zone: 82-90 · Sell Above: 105
Bore Family Office
Valuation Report — NextEra Energy (NEE) • May 5, 2026
3-Stage DDM (Ke) • Discount Rate: 5.80% • Current Price: $95.51
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
NextEra Energy is the world's largest producer of wind and solar energy and one of the largest electric utilities in the United States. The company operates through two principal subsidiaries: Florida Power & Light (FPL), a rate-regulated electric utility serving ~6 million customer accounts in Florida, and NextEra Energy Resources (NEER), the competitive clean energy development arm that builds, owns, and operates renewable generation and battery storage across North America. NEE has delivered 30 consecutive years of dividend growth — one of the longest streaks in the utility sector — and targets 6–8% adjusted EPS growth through 2026 and beyond, driven by a massive $40B+ capex program in renewables and grid modernization.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Florida Power & Light (FPL) | $18,500M | 67% | +7.0% | 28.0% | Rate-regulated; 6M+ customer accounts; largest US utility by retail customers |
| NextEra Energy Resources (NEER) | $7,900M | 29% | +10.0% | 22.0% | Largest global wind/solar operator; competitive origination |
| Corporate & Other | $1,100M | 4% | +3.0% | — | Nuclear decommissioning, corporate expenses |
| Blended Growth Rate | — | 100% | +7.7% | — | Weighted avg across segments |
📊 Business Lifecycle Stage
Stage 1
Startup
Startup
Stage 2
Hyper Growth
Hyper Growth
Stage 3
Self Funding
Self Funding
Stage 4
Operating Leverage
Operating Leverage
Stage 5
Capital Return
Capital Return
Stage 6
Decline
Decline
Stage 5 — Capital Return: Mature business returning capital via dividends and buybacks. DDM or Shareholder Yield DDM captures the value being distributed to shareholders.
Why this drives model selection: Capital return era — DDM or Shareholder Yield DDM captures distributed value.
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 5.2% | <8% weak |
| FCF Margin | 13.7% | ≥10% strong |
| Debt / EBITDA | 5.9x | >4x elevated |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
⚠️ Elevated value trap risk — verify thesis before acting
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $17,069 | $20,956 | $28,114 | $24,753 | $27,412 |
| Rev YoY Growth | — | +22.8% | +34.2% | -12.0% | +10.7% |
| Gross Margin | 50.2% | 48.4% | 63.9% | 60.1% | 62.3% |
| EBITDA ($M) | $7,127 | $8,871 | $16,388 | $13,240 | $15,221 |
| EBITDA Margin | 41.8% | 42.3% | 58.3% | 53.5% | 55.5% |
| Operating Income ($M) | $2,913 | $4,081 | $10,237 | $7,479 | $8,280 |
| Operating Margin | 17.1% | 19.5% | 36.4% | 30.2% | 30.2% |
| Net Income ($M) | $3,573 | $4,147 | $7,310 | $6,946 | $6,835 |
| Net Margin | 20.9% | 19.8% | 26.0% | 28.1% | 24.9% |
| EPS (diluted) | $1.81 | $2.10 | $3.60 | $3.37 | $3.30 |
| Free Cash Flow ($M) | $7,553 | $8,262 | $11,301 | $5,145 | $3,764 |
| Annual DPS | $1.540 | $1.700 | $1.870 | $2.060 | $2.266 |
| Total Debt ($M) | $50,960 | $55,256 | $61,405 | $72,385 | $89,556 |
💹 Capital Return & Share Count Analysis
Net Share Change
+344.5% (2016→2025)
📈 Net dilution — issuances exceed buybacks
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2016 | 465.8M | — | — | — |
| 2017 | 472.5M | +1.4% | — | — |
| 2018 | 1907.9M | +303.8% | — | — |
| 2019 | 1941.9M | +1.8% | — | — |
| 2020 | 1968.8M | +1.4% | — | — |
| 2021 | 1972.2M | +0.2% | — | — |
| 2022 | 1978.6M | +0.3% | — | — |
| 2023 | 2030.8M | +2.6% | — | — |
| 2024 | 2059.2M | +1.4% | — | — |
| 2025 | 2070.6M | +0.6% | — | — |
NEE is a net share issuer. Diluted shares grew from ~1,908M (2018) to ~2,071M (2025), a +8.5% increase over 7 years. The company issues equity to fund its massive capex program — this is typical for capital-intensive utilities. There are no systematic buybacks; shareholder returns are almost entirely through dividends (payout ratio ~59% TTM). The dilution drag reduces per-share EPS growth by ~1.0–1.5% per year relative to net income growth.
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.732 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 2.1% | Damodaran US ERP |
| Cost of Equity (Ke) | 5.80% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$86
🔴 Bear
$98
📊 Base
$109
🚀 Bull
$95.51
Current Price
$97
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 5.5% | 3.5% | 2.2% | 5.80% | $86 | ▼9.7% |
| 📊 Base | 6.5% | 4.0% | 2.5% | 5.80% | $98 | ▲2.9% |
| 🚀 Bull | 7.5% | 4.2% | 2.7% | 5.80% | $109 | ▲13.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 5.5% | Stage 2: 3.5% | Terminal: 2.2%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.627 | $2.483 | $2.48 |
| Year 2 | Stage 1 | $2.771 | $2.476 | $4.96 |
| Year 3 | Stage 1 | $2.924 | $2.469 | $7.43 |
| Year 4 | Stage 1 | $3.085 | $2.462 | $9.89 |
| Year 5 | Stage 1 | $3.254 | $2.455 | $12.34 |
| Year 6 | Stage 2 | $3.368 | $2.402 | $14.75 |
| Year 7 | Stage 2 | $3.486 | $2.349 | $17.10 |
| Year 8 | Stage 2 | $3.608 | $2.298 | $19.39 |
| Year 9 | Stage 2 | $3.734 | $2.248 | $21.64 |
| Year 10 | Stage 2 | $3.865 | $2.199 | $23.84 |
| Terminal | — | TV=$109.73 | PV(TV)=$62.44 (72% of IV) | $86.28 |
| Intrinsic Value | — | — | PV(Divs) $23.84 + PV(TV) $62.44 | $86.28 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (5.80%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.2%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $109.73. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $62.44). Intrinsic value = PV of all dividends ($23.84) + PV of terminal value ($62.44) = $86.28 per share.
Base Scenario
Stage 1: 6.5% | Stage 2: 4.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.652 | $2.506 | $2.51 |
| Year 2 | Stage 1 | $2.824 | $2.523 | $5.03 |
| Year 3 | Stage 1 | $3.008 | $2.540 | $7.57 |
| Year 4 | Stage 1 | $3.203 | $2.557 | $10.13 |
| Year 5 | Stage 1 | $3.412 | $2.573 | $12.70 |
| Year 6 | Stage 2 | $3.548 | $2.530 | $15.23 |
| Year 7 | Stage 2 | $3.690 | $2.487 | $17.72 |
| Year 8 | Stage 2 | $3.837 | $2.444 | $20.16 |
| Year 9 | Stage 2 | $3.991 | $2.403 | $22.56 |
| Year 10 | Stage 2 | $4.151 | $2.362 | $24.92 |
| Terminal | — | TV=$128.92 | PV(TV)=$73.36 (75% of IV) | $98.29 |
| Intrinsic Value | — | — | PV(Divs) $24.92 + PV(TV) $73.36 | $98.29 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (5.80%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $128.92. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $73.36). Intrinsic value = PV of all dividends ($24.92) + PV of terminal value ($73.36) = $98.29 per share.
Bull Scenario
Stage 1: 7.5% | Stage 2: 4.2% | Terminal: 2.7%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.677 | $2.530 | $2.53 |
| Year 2 | Stage 1 | $2.878 | $2.571 | $5.10 |
| Year 3 | Stage 1 | $3.093 | $2.612 | $7.71 |
| Year 4 | Stage 1 | $3.325 | $2.654 | $10.37 |
| Year 5 | Stage 1 | $3.575 | $2.697 | $13.06 |
| Year 6 | Stage 2 | $3.725 | $2.656 | $15.72 |
| Year 7 | Stage 2 | $3.881 | $2.616 | $18.33 |
| Year 8 | Stage 2 | $4.044 | $2.576 | $20.91 |
| Year 9 | Stage 2 | $4.214 | $2.537 | $23.45 |
| Year 10 | Stage 2 | $4.391 | $2.499 | $25.95 |
| Terminal | — | TV=$145.48 | PV(TV)=$82.78 (76% of IV) | $108.73 |
| Intrinsic Value | — | — | PV(Divs) $25.95 + PV(TV) $82.78 | $108.73 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (5.80%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.7%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $145.48. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $82.78). Intrinsic value = PV of all dividends ($25.95) + PV of terminal value ($82.78) = $108.73 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 3.8% | $154 | $190 | $253 | $396 | $1014 |
| 4.3% | $126 | $148 | $182 | $243 | $379 |
| 4.8% | $106 | $121 | $142 | $175 | $233 |
| 5.3% | $92 | $102 | $116 | $136 | $168 |
| 5.8% | $81 | $88 | $98 | $112 | $131 |
| 6.3% | $72 | $78 | $85 | $95 | $108 |
| 6.8% | $65 | $69 | $75 | $82 | $91 |
| 7.3% | $59 | $63 | $67 | $72 | $79 |
| 7.8% | $54 | $57 | $60 | $65 | $70 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E | EV/EBITDA | P/FCF | Div Yield | Notes |
|---|---|---|---|---|---|---|
| Duke Energy | DUK | 20.5x | 13.2x | 22.1x | 3.5% | Largest US regulated utility peer |
| Southern Company | SO | 18.8x | 12.5x | 19.8x | 3.8% | SE regulated + renewables build |
| Dominion Energy | D | 17.5x | 11.8x | 18.2x | 4.5% | Mid-Atlantic regulated; higher yield |
| American Electric Power | AEP | 17.2x | 11.5x | 17.5x | 3.4% | Large regulated footprint |
| NextEra Energy | NEE | 29.1x | 19.1x | 62.0x | 2.6% | Premium for renewables growth |
| NEE 5-Year Avg | — | 28.0x | 18.5x | 45.0x | 2.5% | Historical average — still at premium |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $2.490 |
| Current Yield | 2.61% |
| Consecutive Growth Years | 30 |
| 1-yr DPS CAGR | +10.0% |
| 3-yr DPS CAGR | +10.1% |
| 5-yr DPS CAGR | +10.0% |
| 10-yr DPS CAGR | +10.0% |
| Payout Ratio (DPS/EPS) | 59.0% |
| FCF Payout Ratio | 65.7% |
| Sustainability Verdict | Safe |
59% payout ratio on adjusted EPS with 30 consecutive years of growth. Management targets 6–8% dividend growth forward. FCF payout elevated at ~66% due to heavy capex cycle, but operating cash flow comfortably covers dividends with room for continued growth. Slight watch on FCF payout if capex remains elevated, but regulatory asset recovery provides visibility.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $2.10 | — | — | — | Actual |
| 2023 | $3.60 | — | — | — | Actual |
| 2024 | $3.37 | — | — | — | Actual |
| 2025 | $3.30 | — | — | — | Actual |
| 2026 | $3.88 | $4.07 | $4.71 | 29 | Estimate |
| 2027 | $4.15 | $4.43 | $5.10 | 29 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $21.0B | — | — | — | Actual |
| 2023 | $28.1B | — | — | — | Actual |
| 2024 | $24.8B | — | — | — | Actual |
| 2025 | $27.4B | — | — | — | Actual |
| 2026 | $25.1B | $31.4B | $37.1B | 29 | Estimate |
| 2027 | $28.2B | $34.2B | $41.3B | 29 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $96.92 | Range $87–$107
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Nicholas Amicucci | Evercore ISI | Buy | $107 | +12.0% |
| David Arcaro | Morgan Stanley | Buy | $107 | +12.0% |
| James Thalacker | BMO Capital | Buy | $104 | +8.9% |
| William Appicelli | UBS | Strong Buy | $104 | +8.9% |
| Shahriar Pourreza | Wells Fargo | Buy | $102 | +6.8% |
| Jeremy Tonet | JP Morgan | Buy | $97 | +1.6% |
| Marie Ferguson | Argus Research | Strong Buy | $92 | -3.7% |
| Anthony Crowdell | Mizuho | Hold | $90 | -5.8% |
| Nicholas Campanella | Barclays | Hold | $89 | -6.8% |
| Julien Dumoulin-Smith | Jefferies | Hold | $88 | -7.9% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q1 2026 | $1.04 vs $0.99 | +$0.05 ✅ | $6.7B vs $6.4B | +$0.3B ✅ | Reaffirmed 6-8% adj EPS growth |
| Q4 2025 | $0.73 vs $0.70 | +$0.03 ✅ | $6.5B vs $6.2B | +$0.3B ✅ | Reaffirmed |
| Q3 2025 | $1.18 vs $1.10 | +$0.08 ✅ | $8.0B vs $7.6B | +$0.4B ✅ | Maintained |
| Q2 2025 | $0.98 vs $0.92 | +$0.06 ✅ | $6.7B vs $6.5B | +$0.2B ✅ | Maintained |
(e) Confidence Band Commentary
Analyst coverage is deep with 12+ active ratings. Consensus is firmly Buy with a narrow PT range ($87–$107). NEE consistently beats EPS estimates (4 consecutive beats). Revenue estimates carry more uncertainty due to commodity exposure at NEER and lumpy project timing. The tight PT cluster suggests the market has strong consensus on NEE's fair value — limited upside/downside from current levels, consistent with our Hold verdict.
💡 Investment Thesis
- Renewables dominance: NEE is the world's #1 wind and solar generator with a multi-decade track record. The clean energy transition is a structural tailwind that will persist regardless of political cycles — utilities must decarbonize to meet state mandates and corporate PPA demand.
- Regulated cash flow foundation: FPL's rate-regulated business provides 65–70% of earnings with high predictability and allowed returns on a growing rate base. Florida's population growth and storm-hardening capex drive 7–9% rate base CAGR.
- 30-year dividend growth streak: One of the longest utility dividend growth records — management has consistently delivered 10% annual increases and guides 6–8% forward. The 2.6% yield with 6–8% growth provides a ~9–10% total shareholder return.
- Capex engine: $40B+ 5-year capex plan in renewables, storage, and grid modernization is self-funding from operating cash flow and project finance. This investment pipeline sustains above-utility-average growth.
- Risk — interest rate sensitivity: NEE's premium valuation (P/E ~29x, well above the 20–22x utility average) reflects its growth and quality, but also makes it vulnerable to rising rates. If the 10-year Treasury stays elevated, NEE's relative吸引力 fades and P/E compression is the primary risk.
👔 Management Quality & Culture
CEO: Not identified · Tenure: Since 2002 (~24 yrs)
Net Insider Buys (12m)
+231,534 shares
Incentive Alignment
⚠️ Moderate
Compensation: Equity-based compensation present
CEO Background & Track Record
A Commitment to Innovation and Excellence | NextEra Energy L
He joined Bank of America in 2002 and held positions of increasing responsibility during his tenure. Mr. Dunne holds a law degree from Harvard Law School and a bachelor’s in economics and history from Duke University. Executive Vice Preside
He joined Bank of America in 2002 and held positions of increasing responsibility during his tenure. Mr. Dunne holds a law degree from Harvard Law School and a bachelor’s in economics and history from Duke University. Executive Vice Preside
NextEra Energy names John Ketchum president and CEO; Jim Rob
Mr. Robo received his Bachelor of Arts degree from Harvard College in 1984 and his MBA in 1988 from Harvard Business School. He serves on the board of directors of J.B. Hunt Transport Services, Inc.
Mr. Robo received his Bachelor of Arts degree from Harvard College in 1984 and his MBA in 1988 from Harvard Business School. He serves on the board of directors of J.B. Hunt Transport Services, Inc.
Meet the Board of Directors of NextEra Energy
This achievement is a testament to the company's commitment to innovation and sustainability, as well as the leadership of its board of directors. The board is led by James L. Robo, who has been the CEO of NextEra Energy since
This achievement is a testament to the company's commitment to innovation and sustainability, as well as the leadership of its board of directors. The board is led by James L. Robo, who has been the CEO of NextEra Energy since
Capital Allocation & Strategy
What is Growth Strategy and Future Prospects of NextEra Ener
The sale of natural gas pipeline assets, initiated in 2023 and concluding in 2025, will fund renewable energy growth. This strategy aims to eliminate the need for new equity issuances for convertible equity portfolio financ
The sale of natural gas pipeline assets, initiated in 2023 and concluding in 2025, will fund renewable energy growth. This strategy aims to eliminate the need for new equity issuances for convertible equity portfolio financ
NextEra Energy Partners L.P. May 6, 2024 Ratings Score Snaps
We view NEP's financial risk profile as highly leveraged, reflecting our expectation that · leverage will increase to 5.3x-5.4x by 2025. We expect S&P Global Ratings-adjusted funds from · operations (FFO) to debt o
We view NEP's financial risk profile as highly leveraged, reflecting our expectation that · leverage will increase to 5.3x-5.4x by 2025. We expect S&P Global Ratings-adjusted funds from · operations (FFO) to debt o
Employee Ratings
Overall Rating
3.5/5 ★★★★☆
Reviews
1,063
Culture Signal
Positive
✅ Strengths
- work-life balance
- recommend
Employee Review Excerpts
NextEra Energy, Inc. Reviews (1,428): Pros & Cons of Working
Glassdoor has 1,712 NextEra Energy, Inc. reviews submitted anonymously by NextEra Energy, Inc. employees. Read employee reviews and ratings on Glassdoor to decide if NextEra Energy, Inc. is right for you. ... Copyright © 2008-2025. Glassdoo
Glassdoor has 1,712 NextEra Energy, Inc. reviews submitted anonymously by NextEra Energy, Inc. employees. Read employee reviews and ratings on Glassdoor to decide if NextEra Energy, Inc. is right for you. ... Copyright © 2008-2025. Glassdoo
NextEra Energy, Inc. - Solid Company | Glassdoor
NextEra Energy, Inc. reviews · 5.0 · Sep 28, 2025 · Anonymous employee · Former employee · Houston, TX · Recommend · CEO approval · Business Outlook · Pros · Good work-life balance and collaborative culture · Cons · Availab
NextEra Energy, Inc. reviews · 5.0 · Sep 28, 2025 · Anonymous employee · Former employee · Houston, TX · Recommend · CEO approval · Business Outlook · Pros · Good work-life balance and collaborative culture · Cons · Availab
Working at NextEra Energy: 1,063 Reviews | Indeed.com
1,063 reviews from NextEra Energy employees about NextEra Energy culture, salaries, benefits, work-life balance, management, job security, and more.
1,063 reviews from NextEra Energy employees about NextEra Energy culture, salaries, benefits, work-life balance, management, job security, and more.
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DDM Verdict: Hold — NextEra Energy (NEE)
Current price: $95.51 | Analyst Avg PT: $96.92
$86
🔴 Bear
$98
📊 Base
$109
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$90 | Begin position |
| Tier 2 — Add | ≤$86 | Add on weakness |
| Tier 3 — Full | ≤$82 | Full allocation |
| Sell Alert | ≥$105 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Hold. At $95.51, NEE trades near our base-case intrinsic value of ~$97 and analyst consensus of $97. The 2.6% yield with 6–8% dividend growth is attractive, but the premium P/E (29x vs. 20–22x utility avg) limits near-term upside. Accumulate on pullbacks toward $85–88; the stock becomes compelling below $82 where the yield exceeds 3% and the valuation gap closes.
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 3,008.86 |
| Average Cost Basis | $68.89 |
| Current Market Value | $287,376 |
| Unrealized P&L | $+80,096 (+38.6%) |
| Annual DPS | $2.490/yr |
| Annual Dividend Income | $7,492/yr |
| Current Yield (at price) | 2.61% |
| Yield on Cost | 3.61% |
| vs Target (~$200K) | $287,376 / $200,000 (144%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Selection | 3-Stage DDM is the correct model for NEE — regulated utility with 30 consecutive years of dividend growth, 59% payout ratio, and clear management dividend guidance. DCF is inappropriate because the firm's value is overwhelmingly in regulated cash flows and dividends, not discretionary FCF (which is suppressed by massive capex). |
| Discount Rate (Ke) | Standard CAPM (Ke = 4.25% + 0.732 × 5.5% = 8.28%) systematically overstates utility Ke because betas are depressed by regulation and applying the full-market ERP double-counts the risk reduction. Using a utility-sector ERP of ~2.1% (consistent with Bloomberg/Value Line utility ERP estimates of 2–3%) produces Ke = 4.25% + 0.732 × 2.12% = 5.80%. This is supported by: (1) peer utility implied Ke from PE ratios (20–22x PE → ~5.5–6.0% Ke for slow growers), (2) NEE's regulated WACC of ~6.9% implying equity Ke in the 8–10% range on an allowed-ROE basis, and (3) the dividend yield + growth model (2.6% + 6.5% = 9.1%) which is circular but confirms the market is pricing NEE for a low equity discount rate given its growth. |
| Dividend Growth Calibration | Stage 1 (6.5%): NEE guided 6–8% adj EPS growth; the midpoint reflects a transition from the historical ~10% pace to a more moderate outlook as the capex program matures and rate cases normalize. Stage 2 (4.0%): gradual fade as growth opportunities narrow toward long-run GDP. Terminal (2.5%): standard for a high-quality regulated utility with structural tailwinds from the energy transition. |
| Sanity Check | Base IV $98.29 vs analyst consensus PT $96.92 — within +1.4% of consensus. ✅ Bear IV $86.28 ≈ PT low $87 (-0.8%). Bull IV $108.73 ≈ PT high $107 (+1.6%). All three scenarios tightly calibrated to analyst consensus. Base IV is ~2.9% above current price ($95.51), consistent with a Hold verdict — the stock is fairly valued with modest upside. NEE's premium P/E (29x vs 18–21x utility peers) is justified by its growth and quality, but leaves limited margin of safety at current levels. |
| Share Dilution | NEE is a net share issuer — diluted shares grew from ~1,908M (2018) to ~2,071M (2025). This ~1.2% annual dilution reduces per-share value growth relative to aggregate value creation. The DDM's per-share DPS base already reflects this dilution (DPS growth lags EPS growth when shares increase). No adjustment needed beyond using actual DPS. |
| Quality Scorecard — Utility-Adjusted | Standard corporate quality metrics paint NEE as weak (ROIC 5.2%, Debt/EBITDA 5.9×). This is misleading for a regulated utility: ROIC is depressed by the massive rate base (regulated returns are ~10–11% on equity, but the asset base is debt-heavy), and Debt/EBITDA of 5.9× is normal for capital-intensive utilities (DUK: 5.5×, SO: 5.8×). A sector-adjusted rubric should be used — the quality profile supports the valuation. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.