NextEra Energy Partners (NYSE: NEP) has gotten the wind knocked out of its sails in recent years. The renewable energy stock has crashed nearly 70% from its peak in early 2022, pushing its dividend yield up to around 13%. A big factor driving the decline has been rising interest rates.

I've been steadily adding to my position in the high-yielding renewable energy stock, including recently buying more shares at a nearly 70% discount to the peak price. Here's why I think NextEra Energy Partners could generate strong total returns from here.

Implementing and executing its plan

The primary issue weighing on NextEra Energy Partners' stock has been the impact of higher interest rates on its ability to grow. They've made it more expensive for the company to borrow money to finance new investments and refinance existing funding, including the scheduled buyouts of convertible equity portfolio financing (CEPFs). That has forced the company to make two notable strategy shifts:

• Become a pure-play renewable energy producer: Last May, NextEra Energy Partners unveiled plans to focus solely on renewable energy by selling its gas pipeline assets. It intends to use the proceeds to complete all the planned buyouts of CEPFs through 2025.

• Slow its dividend growth rate: NextEra Energy Partners revised its dividend growth expectations in late September. It cut its growth target from 12%-15% annually through 2026 to 5%-8% per year with a goal of 6%. The company aims to power its reset plan with self-funded organic growth, primarily wind repowering projects.

NextEra Energy Partners has already made solid progress on its revised strategy. In December, the company completed the sale of its STX Midstream business to Kinder Morgan for more than $1.8 billion. It used that money to repay related debt with the remaining proceeds earmarked to fund the buyouts of CEPFs maturing in June 2024 and 2025. NextEra Energy Partners plans to sell its remaining gas pipeline operations next year to fund future CEPF buyouts and new renewable energy acquisitions.

Meanwhile, the company estimates it will need to repower about 1.3 gigawatts (GW) of existing wind facilities through 2026 to help achieve its revised dividend growth forecast. It had identified about 985 megawatts of projects by the end of the fourth quarter. That gives it solid visibility into its ability to deliver on its plan. The company doesn't need to make an acquisition this year to deliver 6% dividend growth. As things currently stand, it won't need to issue equity to fund its growth until 2027.

Tremendous long-term upside potential

NextEra Energy Partners' turnaround strategy should help lower its cost of capital, which is important to its future success. The company is primarily a funding vehicle used by leading utility NextEra Energy to recycle capital so it can finance its massive renewable energy development pipeline. The utility noted on its fourth-quarter conference call that "demand for renewables is stronger than ever." Because of that, both companies have very strong long-term growth prospects.

Forecasters expect renewable energy and storage demand to grow at a 13% compound annual rate through 2030. The industry will build more capacity over the next several years (375-450 GW) than it built over the past 30 years (235 GW). That should power increasing expansion opportunities for NextEra Energy, which would trickle down to its affiliate.

As NextEra Energy Partners executes its plan to buy out its remaining CEPFs, it should take some of the pressure off its balance sheet. Likewise, an eventual decline in interest rates should reduce its borrowing costs. Those factors should help lift its stock price, helping further lower its cost of capital. That improvement and a stronger overall financial position should give it greater flexibility to capitalize on the growing opportunity to invest in renewable energy.

Meanwhile, the company has ample organic growth potential. It should have additional high-return opportunities to repower existing wind farms and add battery storage to legacy projects. In addition, the growing demand for renewable energy should boost power prices, enabling the company to sign new power purchase agreements with end users at higher prices as legacy ones expire.

An abundance of catalysts

NextEra Energy Partners owns a large portfolio of income-producing renewable energy assets. They support the company's plans to grow its already high-yielding dividend by around 6% annually through 2026. Meanwhile, the company has an abundance of growth catalysts that could accelerate earnings growth over the long term. Add in the upside from falling rates and the execution of its turnaround plan, and NextEra Energy Partners could produce powerful total returns over the coming years. That's why I've been piling into the stock by scooping up shares following their nearly 70% plunge.

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Matt DiLallo has positions in Kinder Morgan, NextEra Energy, and NextEra Energy Partners. The Motley Fool has positions in and recommends Kinder Morgan and NextEra Energy. The Motley Fool has a disclosure policy.

With Shares Down Nearly 70%, I'm Piling Into this Ultra-High-Yield Dividend Stock was originally published by The Motley Fool