Where will NextEra Energy be in 3 years?

NextEra Energy (NYSE:NEE) is an odd duck in the normally boring utilities sector, given that it has increased its dividend by an incredible 10% over the past decade. That’s huge for a utility, but not an anomaly for the company, which plans to increase disbursement by roughly the same amount through at least 2024. Here’s where NextEra will be in three years if all goes according to plan.

The dividend

It makes sense to start with the dividend here. First of all, NextEra Energy is a dividend aristocrat with over 25 years of annual dividend increases under its belt. That’s not uncommon in the utility space, but it’s still impressive evidence of support for income investors. As noted, the dividend has grown at an annualized rate of over 10% over the past 10 years, but this rate was around 11% over the three and five year periods. This utility is a dividend machine.

Image source: Getty Images.

With the current promise of annual dividend increases of 10% through 2024, this suggests the dividend will rise from $1.70 per share per year at the current rate to something in the $2.25 per share range. . Given the current share price, this would take the yield to buy from about 1.9% today to 2.5% three years from now. It’s a pretty nice jump.

While that’s a good set of numbers to look at, the real question is: how does NextEra Energy plan to do this? The answer is this: by spending up to $95 billion in capital investments between 2022 and 2025. That’s a lot of money.

Where is the money going?

NextEra Energy is truly two companies in one. First, there’s the company’s regulated utility business, which is largely Florida-focused. This state continues to see immigration, which means more customers. More customers mean more need to expand NextEra’s operations in the state and more need to ensure infrastructure reliability.

These two elements should make it easier for NextEra Energy to obtain tariff increases approved by regulators. The downside is that regulated utility operations typically grow slowly. It is therefore essentially the reliable foundation on which growth will be built, not the engine of growth.

The excitement comes from the fact that, in addition to the largest regulated utility company in the United States, NextEra has built the largest solar and wind power generator on planet Earth. It also happens to be the largest developer of wind and solar energy in the United States. Clean energy has seen significant growth, and as it replaces dirtier fuel options, it should continue to offer ample room for growth for years to come – or for the next three years, at the very least.

But to put some numbers on that, NextEra Energy is looking to expand its solar and wind business from a nameplate capacity of 24 gigawatts in 2021 to between 46 gigawatts and 53 gigawatts in 2025. That’s basically doubling the size of company nameplate. production capacity.

On top of that, NextEra is looking to increase the size of its storage capacity from one gigawatt in 2021 to between six gigawatts and eight gigawatts, which is even bigger growth, but from a much smaller base. It is also bolstering its transmission capacity, with plans to double its cumulative investment in this space to around $6 billion.

So the easy answer to where NextEra is three years from now is: well, bigger.

Benefits along the way

This brings the story back to the company’s dividend, which is supported by planned capital expenditures on both core utility operations and the revolving side of the business.

NextEra isn’t a great option for investors looking for high yields, but if you’re a dividend growth investor, you might want to check it out. It historically trades at a premium to its utility peers, but so far it has managed to reward investors well via dividend growth while growing its already impressive business. There is no particular reason to think that the next three years will be different.

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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool fills positions and recommends NextEra Energy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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