Utilities like NextEra Energy (NEE 0.29%) tend to be all about their dividends. NextEra Energy's payout is certainly attractive at a 2.7% yield more than double the S&P 500's 1.2% yield. Meanwhile, it has a magnificent record of paying dividends. The utility has increased its payments for more than 30 consecutive years, growing the dividend at a powerful 10% compound annual rate over the past two decades.
However, unlike most other utility stocks, NextEra Energy is much more of a growth story than an income stock. That was evident in its recently reported third-quarter financial results, where growth -- both in the most recent quarter and in the coming years -- was the main theme.
Keeping its foot on the accelerator
"NextEra Energy delivered strong third-quarter results," stated CEO John Ketchum in the third-quarter earnings press release. The CEO highlighted that his company delivered a 9.7% year-over-year increase in its adjusted earnings per share. That's a brisk rate for a utility, where growth tends to be in the low-to-mid single digits.
NextEra continues to benefit from two notable competitive advantages: Its Florida-based electric utility operations and large-scale renewable energy platform. The energy company owns Florida Power & Light (FPL), the country's largest electric utility. FPL continues to capitalize on the state's growing population and abundant sunshine. The utility is investing significant capital to support the fast-growing state's rising energy needs (another $2.5 billion in the quarter), notably by building out a leading low-cost solar energy portfolio. Those growth drivers enabled FPL to increase its earnings by nearly 13% in the period.
NYSE: NEE
Key Data Points
Meanwhile, NextEra's energy resources segment continues to capitalize on the country's growing demand for renewable energy. It placed another 1.7 gigawatts (GW) of new projects into service during the quarter. That helped power a nearly 13% increase in its adjusted earnings per share.
Powerful growth ahead
NextEra's dual growth drivers should enable it to continue growing its earnings at above-average rates in the coming years. The company reaffirmed its long-term outlook during the quarter. It expects to grow its adjusted earnings per share from a range of $3.45-$3.70 this year to $3.85-$4.32 by 2027, a 6% to 8% annual growth rate. Ketchum stated that the company would be "disappointed if we are not able to deliver financial results at or near the top of our adjusted earnings per share expectations ranges in each year through 2027, while maintaining our strong balance sheet and credit ratings." The company's growth outlook supports its plan to increase its dividend by around a 10% annual rate through at least next year.
NextEra continues to enhance its ability to achieve its long-term growth forecast. During the quarter, the company's energy resources segment secured another 3 GW of new renewable energy and storage projects. That boosted the company's backlog to 30 GW of projects that it expects to complete through 2029.
In addition to renewables, NextEra recently announced plans to restart its shuttered Duane Arnold nuclear plant in Iowa. The company had previously shut down the facility in 2020 due to economic challenges and storm damage. NextEra Energy signed a 25-year power purchase agreement with Google for most of the plant's capacity. It aims to return the facility to commercial service by early 2029. Restarting this facility will add up to $0.16 per share of annual adjusted earnings to NextEra's total over the first 10 years of the plant's restarted operations.
NextEra Energy and Google also agreed to explore developing advanced nuclear generation elsewhere in the country. That collaboration would help the U.S. meet its surging power needs.
Nuclear is one of several long-term growth catalysts that could power NextEra's earnings well into the 2030s. The company is also exploring investment opportunities in new gas-fired power generation, gas pipeline transmission, electricity transmission, and other large-load power projects. Given the country's massive future power needs to support AI data centers, electric vehicles, and new manufacturing capacity, NextEra Energy could continue growing its earnings at a high rate over the next couple of decades.
Powerful total return potential
NextEra Energy expects to continue growing briskly in the coming years. It has increasing visibility into its growth potential through the end of the decade after agreeing to restart its Duane Arnold nuclear power plant. Meanwhile, it has multiple growth drivers in the coming decade. Add this growth to the company's attractive and rapidly rising dividend, and NextEra Energy could produce powerful total returns in the coming years, making it look like an excellent long-term investment.
