IInvesting to earn income doesn’t have to be complicated. Successful income investing can be as simple as choosing easy-to-understand businesses with long-term growth trends on their side.
let’s see how NextEra Energy (NYSE:NEE) and Atmospheric and chemical products (NYSE: ODA) meet these requirements and could offer investors a lifetime of growing dividends.
1. NextEra Energy: The most dominant utility on the planet
With a market capitalization of $151 billion, NextEra Energy is the largest publicly traded utility in the world. NextEra Energy serves 5.6 million customer accounts and more than 11 million customers in Florida through its subsidiary Florida Power & Light Company (FPL), which is the largest rate-regulated electric utility in the United States. United. Through its subsidiary NextEra Energy Resources, NextEra Energy is the largest generator of renewable energy in the world. NextEra Energy Resources provides wind and solar power to 37 US states and four Canadian provinces.
While you’d think the world’s largest utility would deliver slow growth like most other utilities, NextEra Energy defies that expectation. The company more than tripled its non-GAAP (adjusted) earnings per share (EPS) from $0.76 in 2006 to $2.55 last year, which equates to a compound annual growth rate (CAGR) of 8.4%. This rapid earnings growth rate helped NextEra Energy generate a total return of 976% with dividends reinvested over the 15-year period ending December 31, 2021. This total rate of return was four times the S&P500 the total rate of return of the Utilities index of 242% during this period and nearly tripled the total rate of return of 357% of the S&P 500 during this period.
NextEra Energy’s growth shows no signs of slowing either. Indeed, Florida is expected to continue to grow due to its favorable climate, low taxes and business-friendly economy, according to opening remarks from NextEra Energy CFO Rebecca Kujawa on the recent call for company results. In the fourth quarter of 2021, FPL’s customer base increased by 82,000 compared to the prior year period.
Analysts expect NextEra Energy to generate 9% annual earnings growth over the next five years. Coupled with the stock’s dividend payout ratio of just 60.4% last year, this should translate into single-digit annual dividend growth in years to come. For a dividend aristocrat with 26 consecutive years of dividend increases under his belt, the potential for high-single-digit growth each year is an attractive proposition. And investors can lock in NextEra Energy’s 2% dividend yield at a reasonable price-to-earnings (P/E) ratio of just over 27.
2. Air Products & Chemicals: a giant in industrial gases
With a market capitalization of $57 billion and more than 170,000 customers in more than 50 countries, Air Products & Chemicals is one of the largest industrial gases companies in the world. Like NextEra Energy, Air Products & Chemicals is a dividend aristocrat with 40 consecutive years of increasing dividends, with the most recent payout increase being 8%. Considering the 10% CAGR of the dividend since 2014, Air Products & Chemicals is certainly maintaining its dividend growth streak. How was the company able to achieve this impressive growth?
Growing demand for industrial gases and the size and scale of Air Products & Chemicals have helped to grow its Adjusted EPS by 11% per year since 2014. For context, industrial gases are used as inputs into a variety of essential industries like food and beverage, pharmaceutical, electronics. , and clean energy. The vast applications of industrial gases explain why the global industrial gases industry is estimated to grow by 6% annually, from $92 billion in 2020 to $147.1 billion by 2028. As a result, analysts expect Air Products & Chemicals adjusted EPS to grow 11% each. year over the next five years.
With a dividend payout rate set at 61.7% for this year, Air Products & Chemicals has the opportunity to continue to increase its dividend at a healthy pace.
At the current share price of $259, investors can buy Air Products & Chemicals’ market-beating 2.5% dividend yield at a P/E ratio just above 25. For one stock with four decades of rising dividends and more wiggle room, that’s not an unreasonable assessment.
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Kody Kester owns NextEra Energy. The Motley Fool owns 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.