NextEra Energy Partners (NEP -1.12%) has been a monster renewable energy dividend stock over the years. The company has increased its dividend each quarter since its initial public offering (IPO) in late 2014. Overall, it has grown the payout by 240%, including 15% over the past year. NextEra Energy Partners has a current dividend yield of 3.5% after factoring in its latest increase, well above the S&P 500's 1.4% dividend yield.
The clean energy company has plenty of power to continue growing its payout in the coming years, which was evident in its first-quarter results. Here's a closer look at the quarter and what the company sees ahead.
Digging into the quarter
NextEra Energy Partners generated $354 million of adjusted EBITDA and $184 million of cash available for distribution (CAFD) during the first quarter. That's up 20% and 36%, respectively, compared to the year-ago period. Powering that surge was a combination of new projects the company added to its portfolio and stronger results from its existing assets.
One of the biggest growth drivers was acquiring an interest in a 1.1-gigawatt (GW) portfolio of renewable energy projects late last year. The company bought its stake in that portfolio from its parent, utility NextEra Energy (NEE -0.52%), investing $320 million overall. These assets should contribute $75 million to $85 million of annualized adjusted EBITDA and between $24 million and $29 million of CAFD.
The other major contributor to NextEra Energy Partners' strong first-quarter showing was its legacy assets. The company benefited from solid wind resources during the quarter, which helped boost its earnings. It also benefited from lower interest payments due to several financing transactions completed over the past year.
A look at what's ahead for NextEra Energy Partners
NextEra Energy Partners recently unveiled its latest acquisition. The company is buying a portfolio of four wind farms in the U.S. from Brookfield Renewable (BEP -0.13%) (BEPC -0.65%). It's paying $733 million for the 391-megawatt (MW) portfolio, which should generate between $63 million and $70 million of adjusted EBITDA and CAFD per year. In addition to that visible cash flow backed by long-term power purchase agreements, NextEra Energy Partners sees additional upside potential. It could recontract the assets at higher rates and possibly repower these wind farms after their initial contract terms expire.
This deal leads NextEra Energy Partners to estimate that it can generate results toward the upper end of its previous guidance ranges of $1.44 billion to $1.62 billion of adjusted EBITDA and $600 million to $680 million of CAFD in 2021. That should give it the power to grow its distribution to a range of $2.78 to $2.83 per share, or 12% to 15% above last year's level. The company continues to anticipate that it can deliver annual dividend growth in that range through at least 2024, which is a best-in-class growth rate.
NextEra Energy Partners' ability to acquire cash-flowing clean energy assets from NextEra Energy and third-party sellers is powering the dividend growth plan. It has demonstrated its ability to capture both growth drivers over the past year as it has acquired renewable energy portfolios from NextEra and Brookfield Renewable. The company continues to have lots of liquidity to pursue deals thanks to the support of institutional investors like private equity funds. They have provided it with several convertible portfolio equity financings, giving it the flexibility to fund deals without diluting existing investors or utilizing much debt. It has steadily received better terms with each transaction, driven partly by investor demand for financing renewable energy investments.
A high-powered dividend growth stock
NextEra Energy Partners continues to deliver on its growth objectives. The company hasn't had any trouble acquiring assets from NextEra or third-party sellers, thanks to the support of institutional financing partners. Because of that, it seems increasingly likely that the company will achieve its bold growth target. That makes it an excellent option for investors seeking a rapidly rising income stream powered by clean energy assets.