NextEra Energy (NEE 0.27%) has been virtually unstoppable over the past few decades. The utility has increased its dividend for 28 straight years, the third longest streak in the sector. It has grown its payout at a 9.8% compound annual rate since 2006, an impressive rate for a utility.
The company doesn't expect its growth to stop anytime soon. Here's a look at what's ahead for the Dividend Aristocrat.
A dual growth drivers
NextEra Energy has benefited from two growth drivers. The steady expansion of its electric utility in Florida (FPL) and its energy resources segment, which focuses on developing and operating clean energy infrastructure like renewable energy generating facilities, natural gas pipelines, and electricity transmission lines. These two segments have helped NextEra Energy grow its adjusted earnings per share at an 8.4% compound annual rate since 2006, giving it the power to steadily increase the dividend.
The company expects both business units to continue expanding in the future. FPL continues to benefit from the steady migration of people and businesses to the state of Florida. It also identifies smart capital investments like its large-scale solar expansion strategy to help drive growth.
Meanwhile, the energy resources segment is capitalizing on a strong environment for renewable energy development. Over the past quarter, the company secured over 2 gigawatts (GW) of new projects. CFO Kirk Crews pointed out on the company's second-quarter conference call that this marked "the third largest quarter of renewables and storage origination in our history." The CFO further stated, "with these additions, net of projects placed in service, our renewables and storage backlog now stands at approximately 19.6 GWs and provides terrific visibility into the strong growth that is expected at Energy Resources over the next few years."
That's only a portion of the projects it expects to complete. Crews stated: "From 2022 through the end of 2025, Energy Resources expects to build roughly 28 to 37 GW of renewables and storage projects. To put these numbers in context, this expected renewables and storage build at the midpoint is approximately 30% larger than the entire renewables operating portfolio at Energy Resources today."
High-powered growth ahead
NextEra Energy expects to deploy a staggering $85 billion to $95 billion on new investments to expand its operations through 2025. That investment rate would see the company grow its adjusted earnings per share from $2.55 last year to a range of $3.45 to $3.70 per share by 2025. Crews stated that "we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted earnings per share expectations ranges" during that timeframe. This view implies the company will grow its adjusted earnings per share by a roughly 10% compound annual rate from last year's total to the high end of its range for 2025. That's above its average over the past decade and a half, which is impressive considering it's growing off a much larger base.
Meanwhile, NextEra's CFO believes the company will grow its cash flow per share at or above its adjusted earnings growth rate. Crews stated, "We also continue to expect to grow our dividends per share at a roughly 10% rate per year through at least 2024 off a 2022 base." That's an excellent growth rate for a payout that currently yields more than 2%. It's on track to grow at or above its average rate over the past decade and a half.
A high-powered dividend growth stock
NextEra Energy has delivered more than a quarter century of unstoppable dividend growth. The renewable-powered utility doesn't expect that upward trend in the dividend to come to an end anytime soon. That makes it an excellent option for investors seeking a steadily rising passive income stream.