Evaluating a company's growth prospects is vital. That's because profit growth typically drives a stock's returns over the long term.
Agree Realty (ADC -0.48%), EnLink Midstream (ENLC 0.80%), and NextEra Energy Partners (NEP -0.89%) have tremendous growth runways. That could enable these companies to grow their earnings and dividends for years to come.
Lots more shopping ahead
Agree Realty has grown into a decent-sized real estate investment trust (REIT). It has invested $8.1 billion since 2010 to acquire and develop high-quality retail net-lease properties, growing its portfolio to over 2,000 locations. That steady expansion has enabled Agree Realty to grow its dividend at a 5.9% compound annual rate over the last 10 years.
While the REIT already has a sizable portfolio, it has a massive opportunity set to continue expanding:
Image source: Agree Realty.
As that slide shows, there are over 162,000 properties owned or leased by high-quality retailers across its subsector-focus areas that it could acquire in the future.
Agree Realty has ample financial flexibility to continue acquiring income-producing retail properties. It has a fortress-like balance sheet with a strong investment-grade credit rating backed by low leverage ratios and well-staggered, long-term, fixed-rate debt with no material maturities until 2028. That gives it lots of borrowing capacity and flexibility. The REIT also has a relatively low dividend-payout ratio, enabling it to retain cash for investment. Meanwhile, it routinely recycles capital by selling non-core properties and has regularly demonstrated its ability to raise common and preferred-equity financing.
Future investments will increase Agree Realty's income, enabling it to expand a dividend that already yields almost 5%. Those growth drivers should allow it to continue producing attractive total returns.
Capturing a massive opportunity
EnLink Midstream is a midstream company focused on gathering and processing (G&P) oil and natural gas across several production basins. That legacy business generates lots of stable earnings and cash flow. It gives EnLink the money to pay an attractive dividend (currently yielding 4%) while continuing to expand its operations.
The company's legacy G&P business has decent growth potential. Its producing customers are increasing their gas supply to help fuel the next wave of liquified natural gas (LNG) export projects.
However, an even bigger growth driver is carbon capture and storage. The company believes it can leverage its midstream expertise and existing asset footprint to build a large-scale carbon dioxide transportation business:
Image source: EnLink Midstream.
As that slide shows, the company estimates it could grow its earnings by more than 25% in the coming years by creating a carbon solutions business with a relatively modest capital investment over the next five years. That business could produce a meaningful amount of cash, giving it the fuel to continue increasing its dividend.
Powerful growth ahead
NextEra Energy Partners has grown into one of the largest renewable energy producers over the years by steadily acquiring operating assets from its parent, leading utility NextEra Energy, and third-party sellers. Those long-term contracted assets generate lots of predictable cash flow, giving NextEra Energy Partners the power to pay a growing dividend that yields nearly 7%.
The company currently owns nearly 7.6 gigawatts (GW) of wind, over 1.5 GW of solar, 240 megawatts of paired energy storage, and 4.3 billion cubic feet of natural gas pipeline capacity. However, it's selling its natural gas pipeline assets to focus solely on clean energy investment opportunities.
The company has a massive opportunity set of potential investment opportunities ahead:
Image source: NextEra Energy Partners.
Its parent's energy-resources segment alone has 38 GW to 58 GW of current and future renewable energy and storage assets ripe for drop-down transactions. On top of that, it has a growing list of organic expansion opportunities and a massive third-party acquisition opportunity set. Meanwhile, it has other investment opportunities beyond renewable energy, including green hydrogen, electricity transmission, and other renewable fuels like renewable natural gas.
Future investments will help grow NextEra Energy Partners' cash flow, giving it more power to increase its high-yielding dividend. The company plans to expand it by 12% to 15% annually through 2026.
Long growth runways
Agree Realty, EnLink Midstream, and NextEra Energy Partners have grown a lot over the years. However, they still have plenty of growth ahead as they tap into their sizable expansion opportunity sets. Because of that, they should continue growing their earnings and dividends at healthy rates. That could enable them to potentially produce attractive total returns for investors in the coming years.
