• HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT
Tamim Asset Management
  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT

Stock Insights

Nextera Energy –  Having your Cake and Eating it?

17/9/2020

0 Comments

 
Infrastructure companies are essential providers of facilities and structures for the effective operation of a business, state, or economy. They are indispensable to sustainable growth and enjoy stable demand, growing profitability and provide above average yields to equity investors. Robert Swift explores one such stock.
PictureAuthor: Robert Swift
Listed infrastructure companies are currently very attractive investments. Many pay high sustainable dividends and their revenue streams are consistent and secure. Our estimate of the Beta of the infrastructure universe is 0.8 relative to the broader global equity universe. This means that the listed equity infrastructure category will not fall, nor rise as much as the general market. At a time when government bond yields have been suppressed to virtually zero and when equity market volatility is likely to rise, this means that the listed infrastructure ‘asset class’ offers yield and safety. Something which used to be the role of bonds, but which now appears to be beyond them?

We have termed the global infrastructure opportunity as one defined by:-

Renovation – the need to move infrastructure from 3rd World to 1st World status in the USA and much of Europe

Reinvigoration – expanding infrastructure will raise productivity and provide a fiscal multiplier boosting sustainable economic growth

Restitution – the adoption of cleaner renewable and recyclable will raise the quality of economic output.    

This is a brief article on a company which fulfills all 3 criteria. It is a core holding in our Global Infrastructure strategy.
 
Electric utilities are key infrastructure companies, and while not the most exciting of companies to read or write about, it is often the case that boring companies can be great investments.

Nextera Energy (NEE.NYSE) in the USA has been a great investment despite just being an electricity producer, but it is interesting how it actually achieved this because it may help us to find the next “Nexteras”.
​
It is now the largest utility company in the world by market value and the largest producer of wind and solar energy in the world. It has certainly done well for its shareholders. Over 15 years its annualised earnings growth has been 8.4% and its dividend growth has been 9.4%. But even more impressive has been its share price rising 10x over 15 years at an annualised rate of 17%!
Picture
Source: Refinitiv Datastream
Given its good operational performance of earnings and dividend growth it has certainly been well managed with judicious use of capital and M&A activity. It has also played in to two key themes.

  1. It has significantly increased the proportion of its electrical production from renewables – wind and solar power - and 
  2. has also significantly increased its battery storage technology and capacity. So, it now has the largest battery storage capacity in the world. 
These have played well with institutional investors that have been under pressure to invest in a more environmentally conscious way. 

A cynic may say that it has also been very good at marketing itself too and communicating all the right messages to the investment community. You won’t find much mention of the fact that it still has some of those nasty carbon burning power plants in its investor presentations!

Nextera has also explicitly targeted raising its ESG (Environmental, Social, and Governance) scores in other aspects. So Nextera has been ticking a lot of the boxes for investors. As a result, Nextera now trades at a significant valuation premium to other electric utilities at 30x PE for 2021.  So, while it is likely that its best returns for shareholders are behind it but it could yet still outperform its peers; and provide a stable source of income and capital return in a world where government bond yields have been suppressed to virtually nothing.
Picture
Source: Refinitv Datastream
As we move increasingly to electric vehicles (EVs) then this is likely to be a significant boost for electric producers and lead to significantly better growth prospects. So, it should become a more attractive sector with rising valuations, and we should see more M&A activity particularly in more fragmented markets like the USA. So, it’s a sector we prefer within the Global Infrastructure universe right now, with good earnings and dividend visibility in this Covid-19 economic environment.
​
Many countries are likely to run in to electrical capacity constraints – indeed lots of emerging economies already have capacity issues. As countries decommission oil, gas and nuclear plants so there will be a significant demand for wind turbines, solar panels, hydro electric turbines and other capital goods related to the electrical power generation industry.

We are in the middle of a low carbon industrial revolution as companies commit themselves to lowering their carbon footprint. Although Covid may curtail some companies from spending money on capex to be more environmentally friendly it is unlikely to be the electrical producers where project times are long, and they usually have regulatory commitments.  Key beneficiaries from project work like this would be Schneider Electric, Mitsubishi Electric, Siemens, GE, Honeywell, ABB and Vestas Wind Systems. We will write about these in the months ahead.
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Stock Commentary

    At TAMIM we are committed to educating investors on how best to manage their retirement futures.

    Sign up to receive our weekly newsletter:

    * indicates required

    TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.

    Archives

    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    December 2015

    Categories

    All
    2016 Presidential Election
    5G
    AGM Season
    Apple (AAPL.NASDAQ)
    Asia Small Companies
    ASX
    ATL.AX
    Aus Equity All Cap Portfolio
    Aus Equity All Cap Value Portfolio
    Aus Equity Growth Portfolio
    Aus Equity Income Portfolio
    Aus Equity Small Cap Portfolio
    Australian Stocks
    Autonomous Vehicles
    Big Four Banks
    Brexit
    Electric Vehicles
    Emerging Markets
    Energy
    ENN.AX
    FAANG
    Financials
    Fintech
    Global Equity High Conviction Portfolio
    Global Mobility
    Gmg.ax
    Gold
    Growth Stocks
    Guy Carson
    Healthcare
    Income Investing
    Infrastructure
    International Stocks
    Investment Thematics
    IT Services
    Mergers & Acquisitions
    Mobility
    Pharma
    Property
    Rare Earths
    REITs
    Reporting Season
    Retail
    Robert Swift
    Ron Shamgar
    SLK.AX
    Small Cap Income Portfolio
    Small Caps
    Stock Report
    Takeovers
    Technology
    Telco Stocks
    Telstra (TLS.ASX)
    Tourism
    TPG
    Utilities
    Value Investing
    Video
    Wesfarmers (WES.ASX)

    RSS Feed

TAMIM | Equities | Property | Credit
​

TAMIM Fund
Australia All Cap
Australia Small Cap Income
Global Mobility
Global High Conviction
Credit

Listed Property
TAMIM Property
Company
About
Contact
Insights
Invest Online
Login
Other
Privacy Policy
Terms & 
Conditions
​Disclaimer
Contact
Level 4, 55 Grafton Street
Bondi Junction, Sydney NSW, 2022

1300 750 007

ima@tamim.com.au

DISCLAIMER

​The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.  

magellen, kosec, clime, wilson, wam, montgomery, platinum, commsec, caledonia, pengana, tamim

  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT