NextEra Energy (NYSE: NEE) has been a wealth-creating machine over the decades. The utility company has been growing at an above-average rate for years, powered by Florida's growing economy and its focus on investing in clean energy. Those dual growth drivers have given it the fuel to increase its dividend at a 10% compound annual rate over the past couple of decades. That has helped drive significantly higher total returns compared to the S&P 500 (13% annualized versus 10%).
The energy company's growth drivers remain as strong as ever. Because of that, it continues to be one of the smartest investments you can make.
Another strong quarter
NextEra Energy's growth was on full display during the first quarter of this year. The company's adjusted earnings per share rose nearly 9% compared to the prior-year period. That's a robust growth rate for a utility. It continues to benefit from the strong operational performance of its electric utility in Florida (FPL) and its renewable energy platform (NextEra Energy Resources).
FPL generated $1.3 billion, or $0.64 per share, of adjusted net income, a more than 12% increase from last year. The company continues to make smart capital investments to support growing power demand in Florida while also keeping electricity bills low. A big driver continues to be its heavy investment in solar energy. FPL placed 894 megawatts (MW) of low-cost solar into service during the quarter, bringing its total owned and operated portfolio to 7.9 gigawatts (GW), the largest utility-owned solar portfolio in the country.
Meanwhile, NextEra's energy resources segment generated $908 million, or $0.44 per share, of adjusted net income, a 10% increase from the prior year. The company continues to benefit from its heavy investment in developing additional renewable energy capacity to provide for the power needs of other utilities and large corporate buyers. It placed about 700 MW of new capacity into service over the past quarter.
Continuing to add fuel to its growth engine
NextEra Energy expects to continue growing at an above-average rate for the next several years. The company aims to grow its adjusted earnings per share at a 6% to 8% annual rate through 2027 while increasing its dividend by around 10% annually through at least next year. CEO John Ketchum stated in the company's earnings press release that 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 in each year through 2027, while maintaining our strong balance sheet and credit ratings."
One factor driving that optimism is the visible growth the company has already lined up. For example, FPL submitted a comprehensive four-year rate request plan to Florida's Public Service Commission to help cover its heavy investments in the state for solar and battery storage projects. It also filed a 10-year site plan, which forecasts the need to add over 17 GW of cost-effective solar generation capacity over the next decade and the deployment of more than 7.6 GW of battery storage. These proposed investments position FPL to continue growing its earnings for years to come.
Meanwhile, NextEra's energy resources segment had another strong quarter for originating new renewables and storage projects. It added 3.2 GW to its backlog, bringing the total to 28 GW. That helps support its long-term growth expectations through 2027.
The company should have no shortage of future investment opportunities. The U.S. will need to add an estimated 450 GW of additional clean power capacity through 2030. As a leader in clean power, NextEra is in a strong position to continue originating a meaningful share of new development opportunities.
A wise investment
NextEra Energy remains in an excellent position to continue growing its earnings at an above-average rate for a utility due to its operations in Florida and its leading renewable power platform. That should enable the company to continue growing its already attractive dividend (3.3% yield compared to less than 1.5% for the S&P 500 currently) at a strong rate. This combination of income and growth should give the company the power to produce compelling total returns. That return potential makes it look like a very smart investment for the long term.
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Matt DiLallo has positions in NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.
