We're entering a new golden age in the energy sector. Power demand, which has barely budged over the past 20 years, will increase exponentially over the next two decades. After rising 10% since 2005, U.S. power demand could surge 58% over the next 20 years, a six-fold increase in the growth rate. While AI data centers are the primary catalyst powering the demand surge, they aren't the only driver.
Few companies are in a better position to capitalize on this power surge than NextEra Energy (NEE 0.30%). The energy company operates the country's largest electric utility (Florida Power & Light or FPL) and owns one of the largest energy infrastructure development companies (NextEra Energy Resources). These leading platforms will help power supercharged earnings growth for the company over the next decade.
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The partner of choice for AI power demand
NextEra Energy's vast scale and expertise in the energy sector have made it the partner of choice for technology companies seeking to power to drive their AI ambitions forward. A few weeks ago, NextEra announced a new collaboration with Alphabet's (GOOG +1.27%)(GOOGL +1.25%) Google to accelerate the development of nuclear energy in the U.S. As part of the deal, Google signed a 25-year power purchase agreement (PPA) to support the restart of NextEra's Duane Arnold Energy Center, which it will bring back online by 2029.
NextEra and Google are building on their long-standing partnership through a landmark strategic energy and technology partnership to accelerate AI growth. NextEra and Google will partner on multiple sites across the U.S. to build large-scale data center campuses and energy infrastructure. They're currently developing the first three campuses and plan to build more in the future.
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Key Data Points
Meanwhile, NextEra Energy also recently strengthened its partnership with Meta Platforms. The tech titan is signing 11 PPAs and two energy storage agreements totaling 2.5 gigawatts of clean energy. NextEra will build several solar energy projects to support Meta's growing power demands.
High-powered growth prospects
Those recent agreements with some of the world's leading technology companies are only the tip of the proverbial iceberg. NextEra Energy has multiple ways to grow beyond supporting the nearly insatiable power needs of the world's tech titans.
It operates the country's largest electric utility in FPL. Florida's population and economy are growing at an above-average rate. This will support FPL's increasing investment in new power generation, transmission, and distribution infrastructure. The company anticipates investing as much as $100 billion by 2032, which will support a healthy earnings growth rate for the utility.
Meanwhile, NextEra's energy resources segment anticipates investing heavily in building new electricity transmission infrastructure, renewable energy capacity, energy storage, and gas-related infrastructure over the coming years. Its annual investment spending on regulated gas and electricity infrastructure alone could grow from $5 billion this year to between $18 billion and $22 billion by 2032. Meanwhile, the company plans to triple the size of its already leading renewable energy and storage development business by the early part of the next decade. These investments will help support continued earnings growth from that entity.
NextEra Energy estimates that the combined company can grow its adjusted earnings per share by more than 8% annually over the next decade. The company sees multiple additional upside catalysts that could power even faster earnings growth. That 8%+ baseline is above its 6% to 8% annual target range through 2027. That's a robust rate for a utility. Its peers have been growing their earnings at a low single-digit rate over the past couple of decades.
The company expects this high-powered earnings growth rate to support a 10% dividend increase in 2026, followed by a 6% compound annual dividend growth rate through 2028, starting from next year's baseline. That's a healthy growth rate for a high-yielding dividend stock (2.8% current yield compared to 1.2% for the S&P 500).
High-powered total return potential
NextEra Energy is in the pole position to capitalize on the coming surge in power demand. It expects to invest a massive amount of money in the coming years to build new power generation capacity and energy infrastructure to support growing power demand. This high investment rate should fuel robust earnings growth and healthy dividend increases. That could give NextEra Energy the power to produce supercharged total returns in the coming years, making it an excellent energy stock to buy and hold long term.
