NextEra Energy Partners (NEP 1.76%) has been unstoppable since its formation in 2014. The clean energy infrastructure company has increased its dividend every quarter, growing it by an eye-popping 320% overall. That has helped power a 234% total return (15.4% annualized) since its formation, vastly outperforming the S&P 500's 144% total return (11.2% annualized).
The company doesn't see anything stopping its dividend from continuing to surge in the coming years. NextEra Energy Partners anticipates growing its payout at a 12% to 15% annual rate through at least 2025. It recently added more power to achieve that goal. That increases its appeal as a great stock for investors to consider owning for the long term.
NYSE: NEP
Key Data Points
Adding even more power
NextEra Energy Partners recently agreed to acquire additional renewable energy-generating assets from its parent NextEra Energy (NEE 2.44%). It's acquiring a 49% interest in a roughly 1.5-gigawatt (GW) portfolio of wind and solar energy plus storage assets and 100% of the indirect membership interest in about 345 megawatts (MW) of operating wind energy assets.
It's paying $805 million of cash plus the assumption of its share of the portfolio's roughly $1.5 billion of tax equity financing. Most assets are operating or will begin operations within the next year. They'll generate an average of $210 million to $230 million of annual adjusted EBITDA per year and $62 million to $72 million of cash available for distribution (CAFD).
NextEra Energy Partners will finance the transaction by creating a new portfolio that will hold the acquired assets and six existing wind energy assets. It has secured a convertible equity portfolio financing agreement for $805 million with Ontario Teachers' Pension Plan Board backed by this new portfolio. NextEra Energy Partners has used this financing strategy several times over the past couple of years to fund acquisitions. This low-cost financing allows NextEra Energy to eventually buy out the investor's equity interest at a fixed rate of return, limiting dilution to existing shareholders.
This acquisition supports NextEra Energy Partners' outlook that it will grow its adjusted EBITDA from a year-end run rate range of $1.785 billion-$1.985 billion in 2022 to $2.22 billion-$2.42 billion in 2023. Meanwhile, the clean energy infrastructure company sees its CAFD year-end run-rate rising from $685 million-$775 million to $770 million-$860 million. That forecast supports its plan to grow its dividend at a 12% to 15% annual rate through at least 2025.
Another active year
This acquisition is the second one between NextEra Energy Partners and its parent NextEra Energy this year. NextEra Energy also sold a 67% interest in a 230 MW battery storage asset to NextEra Energy Partners earlier this year for $191 million. It helped fund that deal by selling $145 million of new shares.
The company also improved its financial flexibility by selling one of its natural gas pipelines in Texas for $203 million. That gave it additional financial flexibility it could redeploy in acquiring higher-yielding renewable energy assets.
These deals follow a very active 2021 that saw the company acquire a net 2.4 gigawatts of renewables and storage assets. Last year, notable deals were purchasing a 50% interest in a 2.52 GW portfolio from NextEra Energy and buying 400 MW of wind energy assets from Brookfield Renewable (BEPC +0.00%)(BEP 0.53%). These deals enabled NextEra Energy and Brookfield Renewable to recycle capital by selling operating assets to help fund new developments. Meanwhile, they provided NextEra Energy Partners with cash-flowing operating assets to help power a growing dividend.
A powerful dividend stock
NextEra Energy Partners' latest deal will provide it even more power to continue growing its 4%-yielding dividend at a double-digit rate. That positions it to continue generating total annual returns in the mid-teens. This combination of passive income and high total return potential makes NextEra Energy Partners a great dividend stock to consider owning for the long term.
