NextEra Energy (NEE -0.06%) has an excellent income track record. The utility is also a Dividend Aristocrat®, with 30 years of consistent dividend growth. Over the past two decades, NextEra has increased its dividend at a 10% annualized rate.
It's one of the leaders in producing renewable energy and has an extensive backlog of development projects. Combine that growth with the stability of its utility operations, and NextEra should have plenty of power to keep expanding its earnings and dividend in the future. The company expects to increase its payout (which yielded around 3.5% in early 2026) by around 10% in 2026 and by 6% annually in 2027 and 2028.
Income stocks vs. value stocks vs. growth stocks
Income, value, and growth stocks are different categories of stocks based on what they offer investors. Here are some key characteristics of each group and what type of investors might be more interested in the different categories:
- Income stocks: An income stock is any company that pays a higher-yielding dividend that investors would purchase to produce passive income. Some companies tend to lean more towards income generation due to their stable cash flows and slower growth profiles. For example, many pipeline stocks, REITs, and utilities tend to be good income stocks. Income stocks are ideal investments for retirees or those seeking lower-risk investments.
- Value stocks: Value stocks are companies that trade at lower valuations compared to the broader market, their closest peers, or their historical average. Value stocks often trade at a lower valuation for a reason. They've encountered financial difficulties, their growth rate has slowed, they're facing increased competition, or the market has sold off. Investors such as Warren Buffett prefer to invest in value stocks because they believe they can earn attractive returns by paying a reasonable price for a quality company. Many value stocks pay dividends, which can also make them attractive income stocks.
- Growth stocks: Growth stocks are companies growing their revenue at above-average rates. They tend to be earlier-stage companies or those capitalizing on a major growth trend, such as cloud computing or artificial intelligence (AI). Many growth stocks trade at higher valuations and often don't pay dividends or have very low yields. Growth stocks are ideal for younger investors or those seeking above-average returns.
How to create an income investing strategy
The goal of an income investing strategy is to build a diversified portfolio of dividend-paying stocks that generates enough reliable cash flow to meet your needs. Spreading investments across multiple companies and industries reduces the impact of any single company cutting or suspending its dividend.
Beyond individual stocks, dividend-focused mutual funds and ETFs can provide broad exposure to income-generating companies in a single investment. Income stocks tend to be most common in real estate, energy, financials, and consumer staples, so these sectors are natural starting points for building a portfolio.
