NextEra Energy (NEE -0.72%) has been a wealth-creating machine over the decades. The utility has delivered an average annual total shareholder return of more than 14% over the past 20 years, significantly outpacing other utilities and the S&P 500. Powering those robust returns has been NextEra Energy's ability to grow its earnings and dividend at healthy rates.
The electric utility is in an excellent position to continue growing shareholder value in the future. Here's how it could grow a $1,000 investment made in October into over $2,800 over the next decade.
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Powerful earnings growth ahead
NextEra Energy has grown its adjusted earnings per share at a 9% compound annual rate over the past 20 years. This has enabled the utility to increase its dividend at around a 10% compound annual rate during that period. That combination of earnings growth and rising dividend income has really added up over the years. NextEra Energy has delivered a 14.8% annualized total return over the past decade, growing a $1,000 investment into $3,977. Meanwhile, that same $1,000 invested 20 years ago would now be worth over $12,150.
The utility currently expects to grow its adjusted earnings per share by a 6% to 8% annual rate through at least 2027. That's a conservative view, as NextEra has repeatedly said that it would be disappointed if it didn't deliver earnings growth at or near the top-end of its guidance range through 2027.
The company has significant visibility into its near-term earnings growth outlook. NextEra continues to invest capital to support the growth of its regulated electric utility FPL, which is benefiting from Florida's growing population and abundant sunshine. FPL is investing heavily in solar energy to provide its growing customer base with more low-cost power. These investments should grow its rate base at an 8% compound annual rate through 2029, supporting continued earnings growth.
Additionally, NextEra's energy resources business, a leader in renewable energy, is benefiting from robust demand for clean power from other utilities and large corporate customers. NextEra currently expects to invest $75 billion through 2028 on new renewable energy, battery storage, and electricity transmission projects. These projects should support continued strong earnings growth for this segment.
Ample additional growth ahead
NextEra Energy has significant visibility into its earnings growth over the next few years. Meanwhile, its longer-term growth outlook continues to strengthen. That should enable the company to continue growing at a robust rate over the coming decade.
FPL will continue to benefit from Florida's growing population and abundant sunshine. Florida is the third-largest and fastest-growing state by population. S&P Global estimates Florida's population will rise from 23.7 million this year to 26.7 million by 2040 -- a 41% increase from 2010.
The electric utility is investing heavily in solar energy to meet the state's growing power demand. FPL currently has the country's largest utility-owned solar energy portfolio at over 7.8 gigawatts. It expects to deploy over 17 GW of additional solar generation capacity within the next decade, along with another 7.6 GW of battery storage capacity. This investment will increase the company's solar generation capacity from 9% of the total last year to 35% by 2034. It should also support continued earnings growth for the utility.
Meanwhile, electricity demand in the U.S. is starting to accelerate, powered by AI data centers, the onshoring of manufacturing, and electric vehicles. In the near term, this will drive continued strong demand for renewables, which are fast to deploy and economically viable at current prices. Meanwhile, it should drive demand for additional natural gas-fired power plants and potentially new nuclear energy capacity in the 2030s. As a leader in all forms of energy, NextEra Energy should benefit from the expected acceleration in power demand.
Given these growth catalysts, it's easy to envision a future where NextEra Energy delivers adjusted earnings-per-share growth at or above its 6% to 8% annual target range over the next decade.
Adding it all up
NextEra Energy should grow its earnings per share by around 8% annually through at least 2027, with ample drivers to continue growing at or above that rate long-term. This should support ongoing increases to its 3% dividend. Combining that dividend yield and growth rate positions NextEra to deliver an 11% average annual total return (with dividend reinvestment), potentially turning a $1,000 investment made in October into over $2,800 by 2035.
