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NextEra Energy Aims to Increase Dividends 10% Per Year Through 2022

By Neha Chamaria - Apr 22, 2020 at 12:55PM

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The utility just dispelled COVID-19 fears with encouraging long-term guidance and dividend policy.

NextEra Energy (NEE 0.97%) announced its first-quarter earnings on the morning of April 22. The company reported encouraging numbers for the quarter and maintained its previous long-term outlook. Even better, NextEra Energy confirmed its commitment grow dividends despite a challenging business environment due to the ongoing COVID-19 pandemic. 

Strong earnings growth expected through 2022

After its strong showing in 2019, NextEra Energy projected its adjusted earnings per share (EPS) to grow 6% to 8% per year through 2022. The COVID-19 pandemic had fueled fears about whether the utility will still be able to meet those projections. To investors' surprise, management just dispelled all fears by reiterating the below outlook:

  • 2020: Adjusted EPS of $8.70-$9.20. It earned $8.37 per share in adjusted earnings in 2019.
  • 2021-2022: Adjusted EPS compound annual growth rate of 6% to 8%.
  • 2022: Adjusted EPS growth of 6%-8% off 2021 base, or roughly $10-$10.75 per share.
  • 2018-2022: Operating cash flow growth in line with adjusted EPS growth.

These projections are backed by NextEra Energy's strong first-quarterly performance, with its regulated utility Florida Power & Light (FPL) growing net income by 9% and Gulf Power by 8% year over year, respectively.

A rising arrow on a stack of coins depicting income growht.

Image source: Getty Images.

NextEra also advanced its capital investment projects during the quarter despite the coronavirus outbreak hiccups. FPL and Gulf Power, for instance, filed a Ten Year Site Plan with the regulatory authority to merge the two companies into a large, single utility which aims to increase electricity generated from zero-emission sources by 70% by 2029, among other things.

NextEra Energy's focus on cleaner energy sources is why it remains one of the best renewable energy stocks to buy and hold.

Dividends should keep rolling in

NextEra Energy management also updated its dividend policy and expects to grow dividends by roughly 10% per year through "at least" 2022 off its 2020 base of around $5.60 per share. In February, the company increased its dividend by 12%. That's great news for income investors.

In fact, what NextEra Energy just delivered is a win-win for both shareholders and customers: FPL and Gulf Power residential customers can expect a one-time decrease of nearly 25% and 40% in the bills as the company will pass on the benefit of lower fuel costs to customers.

That's some good news amid the COVID-19 gloom.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.

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