NextEra Energy Partners (NEP -1.70%) currently pays a monster dividend. The renewable energy producer has an eye-popping yield currently in the mid-teens. It has continued to grow its big-time payout, which has risen 6% over the past year.

However, a day of reckoning could be coming in January. Here's a look at what might happen to the payment starting next year.

Its strategy shifts aren't working as well as planned

NextEra Energy Partners had grown briskly for many years. Powering its growth has been a steady stream of acquisitions, which it funded primarily with convertible equity portfolio financing (CEPF) arrangements with large institutional investors. This funding has buyout requirements that the company expected to satisfy by issuing stock. Unfortunately, surging interest rates have weighed on the stock price, making it much too dilutive to sell shares to buy out CEPFs as they mature.

The company has taken a couple of notable steps to address the situation. It has significantly slowed its dividend growth rate from 12%-15% annually to 5%-8%, with a target of 6%. It's also selling off its natural gas pipeline assets in stages to help fund its CEPF buyouts and renewable energy asset acquisitions. The hope was that these moves would buy it time to figure out a more permanent solution to improve its cost of capital.

NextEra Energy Partners had planned to continue growing its dividend by around a 6% annual rate through at least 2026, powered primarily by repowering wind energy assets -- i.e., replacing older turbines with larger, more powerful ones. However, the company has removed that guidance from its most recent earnings report. It also plans to complete its CEPF and cost of capital review by January 2025. That seems to suggest investors can expect a big change next year.

The outlook grows dim

NextEra Energy Partners had provided a similar outlook over the past several quarters. For example, in its second-quarter earnings report, it wrote: "NextEra Energy Partners continues to see 5% to 8% growth per year in limited partner distributions per unit, with a current target of 6% growth per year, as being a reasonable range of expectations through at least 2026. The partnership does not expect to need an acquisition in 2024 to achieve its 6% limited partner distribution growth target."

However, that language was absent from the company's recent third-quarter earnings report. Instead, NextEra Energy Partners commented on the continued evaluation of alternatives to address its future CEPF buyouts and cost of capital. The partnership wrote that it's evaluating alternatives that focus "on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth." In reading between the lines, the company seems to be leaning toward reducing its dividend so that it can retain more cash to reinvest in expansion projects.

The company further noted: "Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potentially other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth-quarter 2024 call and intends to provide its distribution and run-rate cash available for distribution expectations at that time."

In all likelihood, the company will significantly reduce its dividend. Its current expectations are that it would maintain a dividend payout ratio in the mid-90s range through 2026 if it kept up its current growth pace of around 6% per year. However, if it shifts to a more organic growth driven approach, it will likely need to reduce its dividend to a payout ratio range of 50% to 70%, which is more in line with other energy infrastructure companies. It could also opt to make an even deeper initial cut, including a temporary suspension, to retain additional cash to help fund some of its CEPF buyouts.

A deep dividend cut seems almost certain

NextEra Energy Partners has tried to continue increasing its dividend as it worked through its financial issues. While the company thought it could grow its payout at a slower pace through 2026 even as it addressed its other issues, that now seems highly unlikely. What's growing more probable is that the company will make a significant dividend adjustment next year, which will allow it to retain more cash to fund its growth. That outcome will likely disappoint income investors. However, it will enable the company to get on a much more sustainable long-term foundation, putting it in a better position to capitalize on the tremendous growth ahead for renewable energy demand.