Unlocking a Lifetime of Income with NextEra Energy
When it comes to building a portfolio that generates a lifetime of income, many investors focus on high-yielding dividend stocks. However, overlooking NextEra Energy (NYSE: NEE) due to its 3% yield could be a mistake. While it may not be the highest-yielding stock, its exceptional dividend growth rate makes it an attractive option for long-term investors.
A Unique Business Model
NextEra Energy is essentially two companies in one. Its regulated utility operation provides a stable foundation, with a monopoly in the Florida markets it serves. Although this side of the business is slower-growing, the state’s rapid population growth means more customers and increased investment opportunities.
The company’s clean energy operation, on the other hand, is a highly reliable cash generator built on long-term contracts. With demand for clean energy on the rise, NextEra Energy is poised to expand this business rapidly, with plans to install up to 46.5 gigawatts of renewable energy by 2027.
Dividend Growth: The Key to Unlocking Lifetime Income
What sets NextEra Energy apart from other utilities is its impressive dividend growth rate. Over the past decade, the dividend has grown at an annualized rate of 10%, significantly higher than the 5% growth rate considered good in the utility sector. The company expects this growth rate to continue through at least 2026, and history suggests it could maintain this pace beyond that.
The Power of Compounding
To illustrate the impact of NextEra Energy’s dividend growth, let’s look at some numbers. If you had purchased the stock at its highest price point in 2013, your yield on purchase price would be over 9% today, thanks to years of rapid dividend growth. Additionally, the stock price has appreciated significantly, providing a notable capital gain.
Why Dividend Growth Matters
High-yield stocks often come with slow dividend growth rates, which may provide a decent income stream today but limit long-term growth. By investing in a dividend growth stock like NextEra Energy, you can supercharge your income portfolio and set yourself up for a lifetime of income that outpaces inflation.
Before You Invest
While NextEra Energy is an attractive option, it’s essential to consider other investment opportunities. The Motley Fool’s Stock Advisor analyst team has identified 10 stocks that could produce monster returns in the coming years. With a proven track record of success, Stock Advisor provides investors with a blueprint for building a portfolio and achieving long-term financial goals.
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