Part I of this piece looked at FPL’s leadership in generating renewable energy, as well as the predominance of wind over solar as a renewable energy source for the utility industry as a whole.
Now we’re moving from talking green-tech and green-stats to talking about your green.
FPL’s stock trades on the New York Stock Exchange under the ticker symbol “FPL.”
A “Safer” Way to Invest in Renewable Energy
Investing in a financially stable utility company that’s profitably developing and using renewable energy to generate electricity is likely a less risky way to invest in renewable energy than investing in a company developing one specific type of renewable energy.
Sure, you may hit it big if you invest in the right company, but you also may put your money into a company that falls by the wayside because its technology is not as good as its competitors’.
FPL will continue to generate electricity regardless of what type of alternative energy proves superior. By nature, utilities generally have a protected monopoly, meaning if you live in one particular area, you’re generally stuck buying your electricity (and water and natural gas) from the company serving your area.
Think you have to sacrifice returns if you invest in a “safe and stodgy” utility? Hardly. FPL’s stock has trounced the US stock market over the past 1-year period: 30% vs 3% return for the S&P 500. That’s before the approximate 2% annual dividend is added in.
And the chart at the top shows you the story over the past 5-year period (S&P 500 in red; Nasdaq in green).
IMO, carefully selected utility stocks are one of the best kept investment secrets. Why? Perhaps because they might not seem as “exciting” as the latest tech stock. Likely because many utilities have DRIPs (dividend reinvestment plans) that not only allow you to automatically reinvest your dividends, but also to purchase additional shares of stock directly from the company. Directly — as in nobody makes a commission off your investments.
Some Financial Stats
- Beta of 0.66 (the stock market as a whole has a beta — or measure of risk — of 1, meaning FPL is about 1/3rd less risky than the market)
- Stock return of 30.0% over the past 1-year period (to Nov. 27) vs the S&P 500’s (a proxy for the overall market) return of 3.0%
- Operating margin of almost 15% and profit margin of almost 9% (on par with industry averages)
- Return on Equity (ROE) of over 13%
- ROE (on wind power investment) stated by company to be in “high teens,” which is very good
- Dividend of about 2%
- Most recent quarter’s revenue and earnings (compared to same quarter of last year) were about flat. This appears to be a fluke as the company has enjoyed steady growth over the long-term — but should be further investigated by anyone considering investing.
- Company’s experience with wind and solar should prove profitable going forward
See you later alligator…as this is Part II of II.
This article is not a recommendation to buy or sell any securities.
Chart: Yahoo Finance
