NextEra Energy, Inc. (NYSE:NEE) owns Florida Power & Light, the largest electric company in Florida, its namesake state. That's not the whole story at this fast-changing utility, however, which is aggressively working to alter its business to keep pace with changes in the overall energy sector. Here's a recap of how the company has positioned itself -- and why, for dividend growth-minded investors, it is still worth a close look.

What NextEra has become

To get things off on the right foot, it's important to note that income-focused investors looking to utility investments for their relatively high dividend yields will probably be disappointed with NextEra's 2.6% yield. You can get roughly two percentage points more from industry giants like The Southern Company (NYSE:SO), Duke Energy (NYSE:DUK), and Dominion Energy (NYSE:D).

A man standing with wind turbines in the background

Image source: Getty Images

Investors are rewarding NextEra with a premium because of management's decision to aggressively change along with the world's energy markets. But what does that mean?

The company's business is broken into two segments: Florida Power & Light and Energy Resources. The typical utility operations in Florida make up about two-thirds of earnings, with Energy Resources pitching in the rest.

Energy Resources is one of the largest renewable power companies in the world. Roughly 70% of its installed capacity is wind, with the rest coming largely from nuclear power and solar. Solar, having recently become more cost effective, is going to a be an increasing focus going forward: NextEra looks to add an additional 40 gigawatts of renewable generation capacity to its current 20 gigawatt tally by the end of 2020. NextEra is aggressively embracing renewable power in a way that many of its peers have not.

NextEra is essentially a combination of a traditional utility and a fast-growing renewable power company, with the traditional utility providing a foundation for NextEra to move quickly into the increasingly important renewables space.

An expensive option for a utility

That said, the premium price being paid for NextEra is pretty steep when you compare it to companies like Duke, Southern, and Dominion. There's the yield difference noted above, but that's not the only metric to consider: For one thing, those three alternatives sport forward price to earnings ratios around 17 -- NextEra's forward P/E is 22. And it's not like these companies are sitting still; each is investing in renewable power as well. NextEra was just quicker to embrace the renewables trend, and has done so in a very big way.

NEE PE Ratio (Forward) Chart

NEE PE Ratio (Forward) data by YCharts

It also helps that Florida is a very good state in which to sell power. The state's population has been growing for many years, blessing NextEra with an expanding customer base. And NextEra has largely avoided some of the headline-grabbing construction mistakes that have hampered peers, like Duke's and Southern's clean coal and nuclear troubles. Dominion, meanwhile, has been facing increasing scrutiny as it looks to acquire smaller peer SCANA Corp, a utility that is struggling through its own nuclear construction fiasco, amid a construction phase that's left Dominion's payout ratio on the high side.

A lower yield and higher forward P/E are good reasons for value-minded income investors to pass on NextEra. However, investors interested in dividend growth should take a closer look at this mix of boring "old" utility and fast-growing renewable power company.

The company is planning to spend as much as $44 billion on its business between 2017 and 2020. That includes up to $19 billion in capital projects to grow its regulated utility operations and, thus, increase its rates. (Regulated utilities have to get permission for rate hikes, with approvals largely driven by spending to improve service.) The rest will mostly be going toward its Energy Resources segment.

NextEra believes this spending, which is tilted toward Energy Resources, will push overall earnings higher by roughly 6% to 8% a year through 2021. Dividends, meanwhile, are slated to grow between 12% and 15% a year through 2020, based on a mixture of earnings growth and a higher payout ratio. The company's 2017 payout ratio of 59% was well below the industry average of 65%, so there's plenty of room for increases here.

NEE Chart

NEE data by YCharts

Dividend growth of up to 15% a year is huge for any company, let alone a utility. It's no wonder that investors are rewarding NextEra with a premium price relative to those of peers with slower dividend growth rates. And since stock prices often follow dividends higher over time, NextEra is still an attractive option for investors seeking out a utility with more of a growth profile.

Not your typical utility

At the end of the day, NextEra is not a good fit for conservative, income-focused investors. However, those looking for dividend growth should like the company's business mix, investment plans, and dividend growth prospects. If that sounds like you, then it may be time for you to do a deep dive into NextEra.

Reuben Gregg Brewer owns shares of Dominion Energy, Inc and Southern Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.