Among the challenges many retirees face is that while they live on fixed incomes, their expenses tend to grow at a faster rate than inflation due to medical costs. Because of that, retirees run the risk of eventually outgrowing their incomes. One way to combat this potential problem is by holding investments that will generate a growing income stream. That rising cash flow can help offset inflation, allowing retirees to sleep better at night.

While several companies could fit that bill, utility giant NextEra Energy (NYSE:NEE) is one of the best. Not only does the company expect to pay a fast-growing dividend over the next couple of years, but thanks to its focus on renewables, it should be able to continue increasing its payout for decades to come.

Solar panels in a field with a bright sun and a rainbow sky in the background.

Image source: Getty Images.

It's easy to dream on this dividend-growth forecast

NextEra Energy is the largest electric utility in the U.S. and it's focused on distributing power, as well as natural gas, to customers in Florida. In addition to that, the company is the world leader in generating electricity from the wind and sun.

These businesses produce very stable cash flow since electric and gas demand in Florida has been steadily growing for years and the company has signed long-term contracts to sell its renewable power to other utilities and end users at competitive rates. That leaves the company with plenty of money to pay its dividend, which currently yields an above-average 2.6%, as well as invest in expansion projects.

NextEra Energy is in the process of investing $40 billion into expanding its utility and renewable-power businesses. The company believes that these investments will help grow its earnings per share at a 6% to 8% compound annual growth rate through 2021, which is a faster pace than the average utility. That earnings growth, along with a slight increase in the company's dividend payout ratio -- which is well below the industry average -- should support 12% to 14% annual dividend growth through at least 2020.

Even dreamier growth potential

While NextEra Energy's current dividend-growth outlook only stretches through the end of next year, the company should have plenty of power to continue pushing its payout higher in the years to come. Driving that view is its growing backlog of renewable energy projects. For example, this past January, the company's Florida utility announced its "30-by-30" plan to install more than 30 million solar panels in the state by 2030, making it the world leader in solar energy.

Meanwhile, the company is continuing to secure new wind, solar, and battery projects in its energy resources division. That's giving the company increasing confidence that it can sustain its current earnings growth rate well beyond 2021, which should support similar dividend increases.

The company could continue growing both at a healthy rate for quite some time. Two factors support this view. First, NextEra noted on its fourth-quarter conference call that continued technology improvements and cost declines have wind and solar projects on track to be cheaper than all but the most fuel-efficient natural gas plants -- and that's with adding in battery backup -- early in the next decade.

Meanwhile, according to one estimate, we need to invest a jaw-dropping $10 trillion to replace the current carbon-based power systems in the world's largest markets. That combination of an increasingly cost-competitive solution and massive market potential should provide NextEra with plenty of opportunities to expand in the coming decades, which should allow for continued dividend growth.

A dividend growth stock for the ultra-long term

NextEra Energy looks like it should be able to increase its already above-average dividend at a meaningful rate for decades to come. That makes it a dream stock for retirees, since the company's steadily rising income stream should help them keep up with rising expenses in retirement.