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NextEra Energy Partners (NEP) first joined our Conservative Holdings in May 2016. Since then, its dividend has increased by 122%, which includes a 15.1% increase over the last 12 months, notes Roger Conrad, editor of Conrad's Utility Investor.

The limited partnership affirmed its target dividend growth rate will remain at 12% to 15% a year “through at least 2024.” That’s roughly twice currently elevated inflation. And if achieved, an investment now would be earning a 6%+ yield within three years, and over 8% in five.

Beating inflation by that much should ensure a big gain for Partners’ shares as well. There are skeptics, demonstrated by the stock’s 16% decline so far in 2022. But I think the company is more likely to actually top its dividend growth target.

The vast majority of Partners’ current revenue flows from its roughly 8 gigawatts of wind, solar, and energy storage capacity. Output is sold to strong counterparties under contracts with an average remaining life of 14 years, providing a solid basis for paying the current dividend.

Growth, meanwhile, depends on making consistent and accretive acquisitions. In the early years following its June 2014 IPO, Partners’ expansion was hampered by limited access to capital markets. Parent NextEra Energy (NEE) subsidized its growth by selling it assets at good prices, usually by subsidizing funding.

But as Partners has grown, its ability to access outside financing has greatly improved. The result is a virtuous cycle: Partners’ accelerating growth means it can fund more purchases from NextEra Energy and even third parties. Those sales will enable the parent to fund faster expansion, which means more available assets for Partners to buy.

Last year, Partners added 2.35 gigawatts of capacity. I expect an even better result this year, easily funding another 15%+ dividend boost. Dividends are tax-advantaged, but there’s no K-1 to file. I would say NextEra Energy Partners is a buy under $80.