1 Dividend Stock That's Still Got Growth

Do you want the good news or the bad news first? NextEra Energy (NYS: NEE) reported its Q3 earnings, and the utility company's not lighting up any portfolios today. But NextEra continues to set itself up for long-term gains, and has an alternative ace up its sleeve for investors willing to dig deeper into this dividend stock's growth potential.

Number crunching
NextEra is comprised of two separate companies: regulated utility company Florida Power & Light (FPL) and unregulated North American electricity wholesaler NextEra Energy Resources (NEER).

The good news: FPL, the biggest money-maker for NextEra, cashed in $392 million net income over the past quarter. This represents a 13% increase over Q3 2011, and brought FPL's earnings per share to a solid $0.93.

The bad news: NEER's adjusted earnings dropped to $162 million, more than 20% lower than last year. Adjusted earnings per share squeaked in at $0.38.

The utility company's adjusted earnings per share totaled $1.26, five cents less than Q3 2011. While this 4% decrease isn't exactly good news, the corporation's 12% sales drop could certainly turn some bulls into bears.

Great expectations or hate expectations?
Mr. Market likes to pout, and NextEra's report today might put some frowny faces on analysts' majority "outperform" analyses. Wall Street expected $3.88 billion in sales, or $1.39 per share.

But if there's one thing CEO Jim Robo couldn't stress enough on the earnings call, it was his distaste of quarterly reports. "Our focus should be on achieving our annual objectives," Robo said, and he expects Q4 to enable his company to do just that. As earnings season heats up, we've seen exceptional companies lowering guidance for the next quarter and year. NextEra, however, notes "no significant changes" to 2012 or long-term expectations.

So why the optimism? Let's take a look at NextEra's next steps, and see if we believe in its future.

Gone with the wind?
The most important decision investors have to make when considering this utility's potential is the viability of wind power. NextEra is the nation's largest renewable energy producer, and it's set its sights on wind power as the next big winner.

NEER sold 16,600 MW of electricity last year, and expects to add an additional 1,500 MW of wind capacity to its offerings by the end of the year.

It's not alone, either. Duke Energy (NYS: DUK) has diversified itself, and has quickly overtaken other companies to become No. 2 in renewable energy production. Even nuclear-centric Exelon (NYS: EXC) is testing the waters of hydro and wind.

But do seasoned investors think wind is hot air? Why not ask Berkshire Hathaway's (NYS: BRK.B) Warren Buffett about his recent acquisition of two wind projects in California.

Jim Robo assured investors in the call today that NextEra's wind expansion projects are not dependent on production tax credits, which are up for consideration this year and may not make it through the political maelstrom of election season.

While solar pales in comparison to wind, the company is also pushing forward with plans to increase its solar output to 900 MW by 2016. Earlier this year, NextEra partnered with General Electric (NYS: GE) to acquire a 550 MW solar farm, increasing its solar capacity by around 85%.

Source: NextEra 10-K (NEER statistics)

NextEra's FPL division isn't without its own risks. Although the Florida utility consistently offers the cheapest rates with some of the highest quality (it recently ranked 17 on a national customer survey of 100+ utilities), the company is currently causing a ruckus with rate increases in the Sunshine State. The "Office of Public Counsel" opposes NextEra's proposal, which would increase the average customer's bill by about $1.50 per month. Regulated utilities rely on rate increases to boost revenue, and this could cause FPL's recent capital projects to linger on the books longer than NextEra would like.

What's next for NextEra?
NextEra executives will not be popping open the bubbly tonight, but I'm decidedly bullish on this company's future. Management expects NextEra's 3.4% dividend to grow at a 10% compounded annual 10%, and the company's growth potential outweighs any risk from renewables. Regulation tiffs are hardly news for utilities, and FPL's growing customer base should help to make up for any rate stagnation. I've made an "outperform" call on my Motley Fool Caps page, and am looking forward to seeing where this corporation heads in the next few years.

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The article 1 Dividend Stock That's Still Got Growth originally appeared on Fool.com.

Justin Loiseau owns shares of Berkshire Hathaway and General Electric Company. He also regularly uses electricity and intermittently uses wind. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool owns shares of Berkshire Hathaway and General Electric Company. Motley Fool newsletter services recommend Berkshire Hathaway and Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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