NextEra Energy Partners (NEP +1.78%) is a unicorn among dividend stocks. It offers a well-above-average dividend yield of 4.5% after its recent boost, versus 1.7% for the S&P 500. Meanwhile, it's growing that payout at a blistering pace (15% last year, compared to the 7% median average dividend growth rate for stocks in the S&P 500). With more high-powered dividend growth ahead, it's a no-brainer dividend stock to buy these days.
Another powerful year
NextEra Energy Partners recently reported its fourth-quarter and full-year results. CEO John Ketchum summed it up well when he stated in the earnings release, "NextEra Energy Partners had a terrific year of execution in 2022, while delivering on its commitments to unit holders." The CEO pointed out that the company "grew limited partner distributions per unit by approximately 15% year over year and delivered more than 20% year-over-year growth in adjusted EBITDA, highlighting the strength of our operating portfolio."
The company recently declared its latest dividend payment at $0.815 per unit each quarter. That's up 3.5% from last quarter's level and 15% above the prior year's payment.
NYSE: NEP
Key Data Points
Powering the company's growth were new assets it has acquired over the past year. It acquired 1.2 gigawatts (GW) of renewable energy and storage assets in two separate transactions with its parent, NextEra Energy (NEE 2.19%). It bought a 67% interest in a 230-megawatt (MW) battery storage facility in California earlier in the year.
The company followed that up by acquiring a 49% interest in a 1.5 GW renewables portfolio and 100% of a 345 MW wind energy portfolio. The win-win partnership enabled NextEra to recycle capital by selling operating assets to its affiliate, bringing in cash to fund new developments. Meanwhile, the transactions supplied NextEra Energy Partners with cash-flowing clean energy infrastructure to support its rapidly rising dividend.
Much more growth ahead
Ketchum believes:
NextEra Energy Partners is extremely well positioned with ample liquidity to finance future growth and to capture a meaningful share of the long-term opportunity set in renewables, which has significantly expanded as a result of the Inflation Reduction Act. This significant opportunity set and NextEra Energy Partners' meaningful financing flexibility provide us with confidence in our ability to continue to deliver long-term value for unit holders over the coming years.
Based on that visibility, the company is extending its dividend growth forecast by one year through 2026:
Data source: NextEra Energy investor relations presentation.
As that slide shows, the company believes it can grow its payout by at least a 12% average annual rate over the next several years. That's a leading growth forecast for a higher-yielding dividend stock.
The company's continued ability to acquire cash-flowing clean energy infrastructure from NextEra Energy is a big confidence driver. That company has a vast and growing opportunity set, giving it a nearly endless supply of assets to drop down to its affiliate.
NextEra Energy Partners also has demonstrated the ability to acquire assets from third parties and invest in organic expansion projects. For example, in 2021, it acquired a nearly 400 MW portfolio of operating wind assets from Brookfield Renewable (BEP +0.14%)(BEPC +0.00%) for $733 million. That deal enabled Brookfield Renewable to recycle capital to help fund its extensive expansion project backlog while providing NextEra Energy Partners with more cash-flowing assets. It has also completed wind repowering projects (replacing older turbines at wind farms with newer ones that produce more energy) and capacity expansions of some of its natural gas pipelines.
Positioned for powerful returns
NextEra Energy Partners offers investors a high-yielding dividend backed by its extensive portfolio of clean energy infrastructure. Meanwhile, it has the funding sources and opportunity set to continue growing its portfolio at a rate that should support 12% to 15% annual dividend growth through 2026. Those drivers set it up to potentially produce powerful total returns, making it a no-brainer stock to buy these days.
