This 5.9%-Yielding Dividend Stock Has Grown Its Payout by 355% (and There's More to Come)

NextEra Energy Partners (NEP -0.89%) has done a phenomenal job growing its dividend over the years. The clean energy infrastructure company has increased its payout by an impressive 355% since its initial public offering in 2014, including 12% over the past year. That rapid growth has pushed its dividend yield up to an attractive 5.9%. 

The company sees a lot more growth ahead. That could give it the power to generate strong total returns for investors, making it an attractive stock to buy for growth and income. 

The rapid upward trend continues

NextEra Energy Partners recently reported its second-quarter results and declared its latest dividend payment. The company faced some difficulties during the quarter, as weak wind energy resources hurt earnings and cash flow.

The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 2.8% to $486 million, weighed down by a $99 million reduction from its existing portfolio. That offset the $49 million of incremental earnings generated from new projects added to the portfolio.

The company also benefited from $38 million in savings on management fees after its parent, NextEra Energy (NEE -1.36%), agreed to suspend those payments through 2026 while the partnership transitions to a pure-play renewable energy company. The weaker wind resources also caused cash available for distribution (CAFD) to fall 3.4% to $200 million. 

Despite that, NextEra Energy Partners continued to increase its payout. The company raised its quarterly dividend by another 1.4% from the first-quarter level, pushing it 12% above the year-ago amount. With that increase, the dividend has risen 355% since the initial payment in 2014. It also pushed the partnership's dividend yield up to 5.9% at the recent stock price. 

More growth coming

NextEra Energy Partners expects its current headwinds to fade during the second half. That drives its view that it will see strong double-digit growth in adjusted EBITDA and CAFD in the back half of the year. It expects to end the year with annualized portfolio run rates of $2.2 billion to $2.4 billion in adjusted EBITDA and $770 million to $860 million of CAFD.

The other factor powering that outlook is the company's latest acquisition, which closed during the second quarter. NextEra Energy Partners acquired another 690 megawatts of wind and solar projects from NextEra Energy for $708 million. Those assets will generate predictable earnings ($110 million to $130 million of annual adjusted EBITDA) and cash flow ($62 million to $72 million of annual CAFD) backed by long-term contracts. 

Meanwhile, the company took the first step toward becoming a pure-play renewable energy producer by recently putting its STX Midstream assets up for sale. It expects to sell those natural gas pipelines by year-end and plans to use the proceeds to repurchase some of its convertible equity portfolio financing (CEPF). Meanwhile, it plans to sell its Meade natural gas pipeline in 2025 to support its transition strategy. These sales will help eliminate most of its CEPFs while lessening the need to sell stock to fund new renewable energy investments. 

NextEra Energy Partners has a vast opportunity to acquire income-producing renewable energy assets from NextEra Energy and third-party sellers. It's also considering potential high-return organic investment opportunities, like adding battery storage capacity to its existing assets and repowering wind farms by replacing legacy turbines with larger, more powerful ones.

The abundance of opportunities and its funding flexibility drive the company's view that it can increase its dividend by 12% to 15% per year through at least 2026.

A powerful dividend growth stock

While NextEra Energy Partners faced some headwinds during the second quarter, that won't impact its long-term outlook. The clean energy infrastructure company continues to expect it will grow its already high-yielding dividend at a double-digit rate for the next several years. That makes it an excellent stock to buy for those seeking a high-powered passive income stream.