NextEra Energy (NEE -0.53%) has done a magnificent job paying dividends over the years. The utility has raised its payout every year for more than three decades, growing it at a 10% compound annual rate since 2007.
The company should have plenty of power to continue increasing its nearly 3%-yielding dividend. That's evident from its strong second-quarter results and visible growth outlook.
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Another quarter of powerful growth
"NextEra Energy delivered strong second-quarter results, with adjusted earnings per share increasing by 9.4% year over year," stated CEO John Ketchum in the second-quarter earnings press release. The company delivered robust operating and financial performance at both its electric utility (FPL) and energy resources segment.
FPL generated $1.3 billion ($0.62 per share) of net income in the second quarter, a 3.3% increase year over year. The Florida-based utility benefited from continued investment in its business, including $2 billion in capital spending during the second quarter. FPL is investing heavily to install solar panels to capitalize on the state's abundant sunshine.
NextEra's energy resources segment posted nearly $1.1 billion ($0.53 per share) of adjusted net income, rising more than 25% year over year. New investments in renewable energy helped drive growth during the quarter. Over the past three months, the company placed 1.1 gigawatts (GW) of new wind, solar, and storage capacity into service.
The powerful growth should continue
NextEra's strong second quarter gave it the confidence to reaffirm its long-term outlook. It still targets 6% to 8% annual adjusted earnings per share growth from 2024 through 2027. It also expects to deliver about 10% annual dividend growth through at least next year. Ketchum said he would be "disappointed" if the company's financial results did not meet or exceed the top end of its expectations through 2027 while maintaining its strong balance sheet and credit ratings.
Strong, growing demand for renewable energy underpins the company's confidence in its long-term growth outlook. NextEra's energy resources segment added 3.2 GW of new projects to its backlog during the second quarter, increasing it to nearly 30 GW of projects. That's a massive backlog, considering that this segment had 38 GW of operating capacity at the end of March.
Technology and data center customers are major drivers of renewable energy demand. NextEra's energy resources segment added more than 1 GW of projects in the second quarter to support growing power demand from large data center operators. It now has about 6 GW of projects underway tied to technology and data center customers.
When combined with its existing capacity serving this customer group, the company will eventually produce more than 10.5 GW of renewable power solely to support the technology sector. That's more than the generating capacity of many large power companies, and enough to support the energy needs of millions of U.S. homes.
NextEra's growth likely won't slow after 2027. Forecasters expect U.S. electricity demand to surge in the coming decades, accelerating significantly from the modest growth rate of the past couple of decades. As a leader in renewable energy development, NextEra Energy is in a strong position to capitalize on this surge. Few companies can match NextEra's combination of scale, expertise, and financial strength, which it can leverage to deliver the low-cost renewable power its customers need to support their growing energy demand.
A great dividend growth stock
NextEra Energy's earnings are growing rapidly, a trend that should continue in the coming years, driven by strong demand for renewable energy. The company's earnings growth should give it ample fuel to continue increasing its high-yield dividend. That compelling combination of growth and income makes NextEra look like an excellent stock to buy and hold for the long term.
