1 S&P 500 Dividend Powerhouse Down 10% That's a Buy-and-Hold Forever

Key Points

• NextEra Energy has an excellent record of paying dividends.

• The utility expects to deliver high-powered growth over the next few years.

• It should have plenty of power to continue growing in the future.

• 10 stocks we like better than NextEra Energy ›

NextEra Energy (NYSE: NEE) is a dividend powerhouse. The utility has grown its payout at an impressive 10% compound annual rate since 2007 and raised its payment every year for the past three decades.

Now is a great time to buy this elite dividend stock. Shares are down 10% from their 52-week high even as the S&P 500 has rallied roughly 15% over the past year and sits near its all-time high. As a result, NextEra Energy's dividend yield has risen to about 3%, while the S&P 500's has slipped to 1.2%, near its lowest level on record. Investors who buy today can lock in a lucrative and growing income stream that could last a lifetime.

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High-end growth for at least the next few years

No one invests more money in America's energy infrastructure than NextEra Energy. Its heavy investment over the years has enabled it to build a world-leading renewable energy portfolio. The company currently plans to invest a staggering $120 billion in America's energy infrastructure through 2027, focusing on projects to expand its electric utility in Florida and grow its renewable energy platform.

Government-regulated rate structures and long-term, fixed-rate contracts support these investments, providing NextEra Energy with a clear line of sight into its earnings growth rate over the next few years.

The utility company currently expects to grow its adjusted earnings per share at a 6% to 8% compound annual rate through 2027 from 2024's baseline. That's a conservative outlook. CEO John Ketchum has repeatedly stated that the company would 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."

NextEra Energy expects its strong earnings growth to support further dividend increases. The company currently plans to grow its dividend by at least 10% annually through 2026, aided by its conservative dividend payout ratio.

Ample power to continue growing for years to come

NextEra Energy should be able to continue growing its earnings and dividend at healthy rates well beyond the next couple of years. Powering that view is the expected surge in U.S. power demand over the next couple of decades. Forecasters believe that U.S. electricity demand will grow by a staggering 55% by 2040, compared with 2020's level. Several catalysts will fuel this surge, including AI data centers, the onshoring of manufacturing, and the electrification of transportation.

The country will need to build a lot of new power-generating capacity in the coming years to support the expected surge in demand. The U.S. needs to add an estimated 450 gigawatts of electricity-generating capacity by 2030. That will be a challenge, given the long lead time required to build new natural gas and nuclear capacity. And that means renewable energy is likely to provide the bulk of the incremental power demand over the next several years.

This outlook bodes well for NextEra Energy, which is a leader in developing and operating renewable energy. The company has the scale, expertise, and financial resources to capture a meaningful portion of future renewable energy development projects. These future investments should support continued earnings growth for years to come.

NextEra Energy also has the expertise to support the growth of other clean energy sources in the future. It's a leader in building and operating gas-fired power plants and has a fleet of nuclear power plants. In addition, the company is evaluating new energy technologies, such as hydrogen and small modular reactors. The company's broad expertise across the energy sector puts it in an excellent position to capture future growth opportunities as they arise.

A powerful wealth creator

NextEra Energy should continue growing its earnings at a healthy rate for years to come as U.S. power demand surges. That should enable the company to increase its high-yielding dividend. This combination of income and growth could power robust returns for investors over the long haul, especially from today's lower share price, making NextEra Energy a great stock to buy and hold 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.