For investors seeking a robust long-term portfolio, the allure of visible earnings growth cannot be overstated. Delving into stocks with promising profit trajectories sets the stage for financial success down the road.
Identified by a few astute contributors at Fool.com, NextEra Energy (NYSE: NEE), Clearway Energy (NYSE: CWEN, NYSE: CWEN.A), and Ford (NYSE: F) shine bright as prime contenders with substantial long-term growth potential. Here’s why these stocks are pegged as no-brainer buys at this moment.
NextEra Energy: A Utility Outlier in Dividend Growth
Reuben Gregg Brewer (NextEra Energy): NextEra Energy, though traditionally not a high-yield player in the utility segment, presents an enticing yield of 3.6% at present, hovering near its decade-high yield. A hybrid of regulated utility and renewable energy businesses, NextEra Energy has impressively increased its dividend at a 10% annual rate over the past ten years – a rarity in the utility realm. Attractive dividend options coupled with estimated 6-8% steady earnings growth through 2026 affirm the buoyant trajectory for investors eyeing steady returns. The future shines bright for this gem of a utility.
Clearway Energy: Sustainable Dividend Growth on the Horizon
Matt DiLallo (Clearway Energy): Clearway Energy, a standout as one of the nation’s premier renewable energy generators, boasts a diversified energy portfolio including eco-friendly natural gas power plants. The company’s cash flow stability, propped by fixed-rate agreements with utilities and corporates, fuels its robust dividend yield of 7.1%. Embracing a capital recycling strategy, Clearway’s recent divestment of thermal assets for $1.3 billion has paved the way for strategic reinvestments into higher-yielding renewable projects. With promising projections of cash available for dividends destined to climb from $342 million to $435 million, the path to sustained dividend growth post-2026 looks paved. The confluence of falling share prices rallied by the renewable energy mega-trend cements Clearway Energy as an indispensable long-term bet.
Ford Motor Company: Navigating Towards Revitalization
Neha Chamaria (Ford Motor): Ford’s recent financial triumphs in the fourth quarter and fiscal year 2023 reflect a revitalized stance despite confronting macroeconomic hiccups and internal impediments. With shares witnessing a commendable 19% surge over the past three months, the automaker seems poised for a promising trajectory forward. The rebound in Ford’s fortunes hints at the dawn of a potentially rewarding phase in its journey, setting the stage for investors to explore the emerging bullish run in the automotive domain.
Ford Rides High on Revenue Growth and Profit Turnaround
Revenue Growth and Profit Turnaround
Amidst the tumultuous waves of 2023, Ford managed to sail smoothly, growing its revenue by an impressive 11%. The company defied expectations by turning a net profit of $4.3 billion, a remarkable feat compared to the net loss of $2 billion in 2022. Noteworthy is Ford’s achievement in generating adjusted free cash flow (FCF) of $6.8 billion, surpassing its own projections of $5 billion to $5.5 billion.
Cost-Cutting and Strategic Focus
While demand remained robust, Ford’s prowess shone through as it implemented cost-cutting measures and reduced capital spending in sluggish markets, paving the way for enhanced overall profitability and returns in 2023. In a strategic maneuver, Ford has decided to trim spending on electric vehicles amidst the global economic slowdown, redirecting its focus to more lucrative ventures like Ford Pro, the commercial vehicles segment that is a prolific source of recurring revenue.
Strong Outlook for 2024
The blue oval brand is gearing up for a stellar performance in 2024, with anticipated adjusted earnings before interest and tax (EBIT) ranging from $10 billion to $12 billion, a promising increase from $10.4 billion recorded in 2023. Additionally, the company aims to secure an impressive $6 billion to $7 billion in adjusted FCF. In a move to reward its shareholders, Ford is committed to distributing 40% to 50% of adjusted FCF in dividends.
Future Prospects and Investor Appeal
With exciting product launches in the pipeline for 2024, including a revamped version of its flagship F-150 pickup truck, Ford emerges as a compelling investment prospect for the year and beyond. The brand’s strategic decisions and focus on profitable ventures like Ford Pro underscore its commitment to sustainable growth and investor value.