NextEra Energy(NYSE: NEE) is an outlier among utilities. It's growing much faster than its peers due to its focus on investing in clean energy. That has helped power robust dividend growth of around 10% annually over the past 20 years.
The utility's magnificent record of dividend growth should continue. Driving that outlook is its high-powered earnings-growth forecast.
Investments continue to power strong growth
NextEra Energy recently reported strong third-quarter results. The company grew its adjusted earnings per share by 10% year over year to $2.1 billion, or $1.03 per share. The energy company's regulated utility in Florida (FPL) and its energy infrastructure business (Energy Resources) both delivered solid performances.
FPL generated $1.3 billion, or $0.63 per share, of net income in the period, a nearly 9% increase. The main driver was the positive impact of new investments.
The company invested $2 billion of capital during the quarter and is on pace to spend $8 billion-$8.8 billion on expansion and other projects this year. It has invested heavily over the years to build a stronger, smarter, and more storm-resilient grid, which paid big dividends in 2024.
The utility was able to quickly restore power to most of its customers after two major hurricanes recently impacted the state. FPL has also invested heavily in solar energy, which is generating clean, low-cost power for its customers.
NextEra's energy resources segment produced $979 million, or $0.47 per share, of adjusted earnings in the period, a more than 9% increase year over year. The primary driver was its continued heavy investment in building additional renewable energy capacity for corporate and utility customers. The company placed about 1 gigawatt (GW) of projects into service since it reported its second-quarter results in July. Those and other projects are growing its earnings.
More growth ahead
NextEra Energy's strong results in the third quarter kept the company on track to achieve its financial guidance. The utility expects its adjusted earnings per share to be in the range of $3.23-$3.43 per share this year, implying 2%-8% growth from last year. Meanwhile, it anticipates its earnings will grow by 6% to 8% annually through 2027 from its 2024 range.
CEO John Ketchum stated in the earnings release, "We will be disappointed if we are not able to deliver financial results at or near the top of our adjusted earnings per share expectations ranges each year through 2027 while maintaining our strong balance sheet and credit ratings."
The company continues to enhance and extend its future growth visibility by securing additional renewable energy projects. NextEra's energy resource segment added another 3 GW of projects to its backlog during the quarter, its second-straight period of delivering new project originations at that level. It now has over 24 GW of projects in its backlog. In addition, it recently signed incremental framework agreements with two large companies to potentially develop up to 10.5 GW of additional renewables and storage projects through 2030, none of which are currently in the backlog.
NextEra's increasing visibility into its future earnings growth helps power the view that it can increase its dividend by around 10% annually through at least 2026. Further supporting that growth rate is the company's lower dividend payout ratio, compared to its peers (59% at the end of last year, compared to a peer average of 65%).
A powerful dividend growth stock
NextEra Energy continues to grow briskly as it capitalizes on the accelerating demand for clean energy. That's powering above-average earnings growth for the utility, which should continue for at least the next several years.
Because of that, it should have plenty of fuel to continue increasing its dividend. Those features make NextEra Energy a great dividend stock to buy and hold for the long term.
Should you invest $1,000 in NextEra Energy right now?
Before you buy stock in NextEra Energy, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NextEra Energy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $879,935!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 21, 2024
Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.
