NextEra Energy (NYSE: NO) has an exceptional dividend payment history. The utility has increased its payments every year for the past three decades and increased its dividend at a robust 11% compound annual rate during the last decade.
An important factor that fuels the utility fast growing payment is focus on investment in renewable energy. Strong demand for clean energy should allow the company to continue growing its dividend at a healthy pace in the future.
He recently agreed to accelerate the development of several solar energy and storage projects, which are expected to boost its already strong growth profile. With a dividend yield currently twice that of S&P500It is (2.7% vs. 1.3%), it can offer investors a high-powered passive income stream.
A powerful partnership
NextEra Energy’s energy resources segment recently entered into a joint development agreement with another utility. Entrance (NYSE:ETR). The agreement will allow NextEra Energy to accelerate the development of new solar generation and storage projects of up to 4.5 gigawatts (GW) over the next five years. This is a significant capacity, given that NextEra’s energy resources segment currently has 30.6 GW. of operational capacity.
The joint development agreement will enable Entergy to make significant progress toward its objective of develop its renewable energy portfolio. It will also allow the utility to provide its customers with more low-cost, carbon-free energy in the years to come. This is an expansion of the companies’ long-standing partnership, where NextEra is already building more than 1.7 GW of renewable energy with Entergy.
At the same time, this agreement will allow NextEra Energy to advance some of its development projects with the help of Entergy. Their agreement will help facilitate the development of several other solar and energy storage projects over the next five years, giving it the opportunity to grow even faster.
Improving already strong prospects
NextEra Energy has already a very strong growth prospects. The utility plans to grow earnings per share by 6% to 8% annually through at least 2026, with operating cash flow likely to increase at or above that range. The company has repeatedly said it will be disappointed if it fails to generate profit growth at or near the top of its range. This optimism and its conservative financial profile support the company’s plan to increase its dividend by around 10% per year until at least 2026.
The company’s strong order book for renewable energy projects is an important factor that motivates its growth prospects. NextEra’s energy resources segment is adding new projects to its backlog at a record pace. The company added nearly 2.8 GW of projects in the first quarter, the second best quarter in its history for new renewables and storage generation. The time was the best Never for setting up solar and storage projects. These new projects brought its order book to 21.5 GW of new capacity he is expected to be completed over the next few years.
At the same time, its long-term prospects are even stronger. The company has an industry-leading project portfolio, consisting of an impressive 300 GW in various stages of development. Even if it will not carry out all of these projects, it has historically monopolized 20% of the market for new renewable production and storage. The Entergy deal will allow NextEra to convert more of its pipeline into secured capital projects.
Forecasters estimate that the United States will build between 375 GW and 450 GW of new renewable energy projects between 2024 and 2030. That’s nearly double what is expected. capacity built over the last 30 years (235 GW). Annual capacity development is on track to grow at a compound annual rate of 13% through 2030. These forecasts suggest that NextEra Energy is expected to continue growing rapidly. Given its size and expertise, it will likely get a significant share of this opportunity.
THE powerful dividend growth should continue
NextEra Energy has done a magnificent job increasing its dividend over the years. It is in an excellent position to continue to rapidly increase its payouts, thanks in part to the expected improvement in its Entergy partnership. This makes NextEra a big action buy for those looking for a fast-growing passive income stream powered by renewable energy.
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Matt DiLallo holds positions in NextEra Energy. The Motley Fool ranks and recommends NextEra Energy. The Mad Motley has a disclosure policy.
This Magnificent Dividend Stock Strengthens Its Already Powerful Growth Profile was originally published by The Motley Fool
