NextEra Energy Partners (NEP 2.99%) has been a dividend growth dynamo over the years. The clean energy infrastructure operator has increased its payment every quarter since its initial public offering in 2014. Overall, it has boosted its dividend by more than 290%.
The company expects to continue growing its payout rapidly in the coming years. That makes it an excellent stock for investors seeking to collect a fast-rising passive income stream.
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Continued growth
NextEra Energy Partners recently reported its first-quarter results. The clean energy company grew its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 16% to $412 million despite the absence of $55 million of earnings from a winter storm last year in Texas. Meanwhile, cash available for distribution (CAFD) slipped from $184 million to $169 million. However, that's primarily due to the impact of last year's storm, which made for a tough comparable period. Powering the company's EBITDA growth were the 2.4 gigawatts of renewable energy and storage projects it has added to its portfolio over the past year.
That rising income stream gave the company the funds to increase its dividend once again. It has grown the payout by 15% over the past year to an annualized rate of $2.93 per share. That has pushed its dividend yield up over 4%.
NextEra Energy Partners also took steps to enhance its portfolio. The company agreed to acquire a 67% interest in a 230-megawatt four-hour battery storage facility in California from its sponsor NextEra Energy (NEE 0.54%) for $191 million. The deal will further diversify its portfolio by adding another battery storage project while growing its earnings and cash flow. It expects the asset to generate $13 million to $18 million of annualized CAFD over the next five years. NextEra plans to fund this acquisition with existing debt capacity and close the deal when the project reaches commercial operations later this year.
Meanwhile, the company sold the Momentum Pipeline for $203 million. It expects to redeploy the proceeds from the Texas natural gas pipeline sale into higher-yielding renewable energy investments.
Powerful growth still ahead
NextEra Energy Partners' solid progress in the first quarter allowed the company to reaffirm its full-year outlook. The company expects to grow its annualized EBITDA exit rate to $1.775 billion to $1.975 billion and CAFD to $675 million to $765 million. It also anticipates expanding its dividend to an annualized rate of $3.17 to $3.25 per share. That would push the payout up by 12% to 15% from its 2021 year-end rate. Meanwhile, it expects to deliver that growth while maintaining a dividend payout ratio in the low-80% range.
The company foresees delivering that dividend growth rate through at least 2024. Powering its outlook is its ability to continue acquiring cash-flowing clean energy infrastructure assets. Thanks to its relationship with NextEra Energy, the global leader in producing power from the wind and sun, it has a vast opportunity set. NextEra has a large and growing backlog of development projects that it can help fund by selling operating assets to its partnership. Meanwhile, the company can also continue acquiring additional assets from third parties. It has lots of liquidity to fund investments. The company can enhance its financial capacity by recycling capital like its recent deal to sell a natural gas pipeline to finance new renewable energy investments.
A high-powered passive income producer
NextEra Energy Partners has an impressive dividend track record, growing its payout by nearly 300% since 2014. The clean energy company expects to deliver more high-powered dividend growth over the next several years, fueled by the continued expansion of its portfolio. That makes it an excellent stock for investors seeking to collect a fast-growing passive income stream, especially one powered by renewable energy.
