3 Renewable Energy Dividend Stocks With High Yields

The vast majority of countries are going through a secular shift from fossil fuels to renewable energy sources in an effort to stop the climate change. This transition has greatly accelerated since the onset of the coronavirus crisis and has decades to run, as most of the global energy consumed is still produced by fossil fuels, namely oil products and natural gas.

As a result, many renewable energy stocks have promising growth prospects ahead.

Here, we'll discuss the prospects of three stocks of this category, namely Brookfield Renewable Partners BEP,  NextEra Energy NEE and Clearway Energy CWEN.

Brookfield Renewable Partners

Brookfield Renewable Partners operates one of the world’s largest portfolios of publicly traded renewable power assets. Its portfolio consists of about 33,000 megawatts of capacity in North America, South America, Europe, and Asia. BEP is a Master Limited Partnership, or MLP.

Hydroelectric energy generates about ~70% of the total funds from operations of the company. Brookfield Renewable Partners has one of the largest hydroelectric businesses in the world, which has doubled in size in the last five years. Hydroelectric assets benefit from long useful lives (often over 100 years) and extremely low operating and capital costs.

Brookfield Renewable Partners has a project pipeline of more than 60,000 megawatts. As this capacity is nearly triple the current installed capacity of the company, it is obvious that the renewable energy giant has exciting growth potential ahead.

In early February, BEP reported financial results for the fourth quarter of fiscal 2023. Its funds from operations (FFO) per unit grew 9%, from $0.35 to $0.38, thanks to inflation-linked power contracts and acquisitions of assets. BEP is resilient to high inflation, as about 70% of its contracts are indexed to inflation. BEP also has most of its costs fixed and is somewhat resilient to high interest rates, as it has no material debt maturities until 2027 and 97% of its debt is at fixed interest rates.

We expect BEP to keep growing its FFO meaningfully via its heavy investing in new projects and the steadily decreasing production cost of solar and wind power. The company invested an almost record $2.0 billion in all major decarbonization assets in 2023 and it is one of the largest publicly traded renewable power platforms. The objective of BEP as a publicly traded partnership is “to deliver long-term annualized total returns of 12%-15%, including annual distribution increases of 5%-9% from organic cash flow growth and project development.”

Brookfield Renewable Partners is currently offering a 6% yield, with a payout ratio of 77% for 2024. The payout ratio is elevated but the MLP is likely to be able to defend its dividend for the foreseeable future thanks to its reliable growth trajectory.

NextEra Energy 

NextEra Energy is an electric utility with two operating segments, Florida Power & Light (“FPL”) and NextEra Energy Resources (“NEER”). FPL is the largest U.S. electric utility by retail megawatt hour sales and customer numbers. The rate-regulated electric utility serves about 5.8 million customer accounts in Florida. NEER is the largest generator of wind and solar energy in the world. NEE generates roughly 80% of its revenues from FPL.

NextEra Energy reported its Q4 and full-year 2023 financial results in late January. The utility continues to deliver stable results, but the stock valuation has come down. For the quarter, the company reported revenues of $6.9 billion (up 11.6% year over year), translating to adjusted earnings of $1.1 billion (up 5.5% year over year). On a per-share basis, adjusted earnings climbed 2% to $0.52. For the full year, the company generated revenues of $28.1 billion (up 34%) and adjusted earnings of $6.4 billion (up 12% year over year).

Adjusted earnings per share were $3.17 (up 9.3%), exceeding the top end -- $3.13 -- of management’s estimate. Particularly, FPL added about 1,200 MW of cost-effective rate base solar projects, while NEER added 9,000 MW worth of new renewables and storage projects, bringing its backlog to over 20 GW. Management initiates its 2024 adjusted EPS guidance range at $3.23-$3.43.

Between 2014 and 2023, NextEra Energy grew its EPS by 9.5% a year. The company’s future growth will be generated through organic investments and acquisitions. For example, there was NEE’s acquisition of Gulf Power in January 2019, and it also acquired GridLiance in Q1 2021 to expand its rate-regulated/long-term contracted business. NEER commissioned ~5.6 GW of renewable and storage projects in 2023.

At the end of 2023, its backlog stood at ~20 GW. Its renewable projects should drive the segment’s profits going forward. NEE forecasts that its adjusted EPS will rise by about 6.4% a year through 2026.

NEE plans to raise the dividend payout ratio further over the coming years, as the company targets a dividend growth rate of ~10% through at least 2024. NEE has increased its dividend for 28 years which makes the company a Dividend Aristocrat. The stock currently yields 3.7%.

Clearway Energy 

Clearway Energy Inc is a large electric utility company which owns and operates contracted energy generation across two segments: conventional generation, and renewables. The company possesses over 8,000 net MW of assets. Clearway is a large owner of renewable energy with over 5,500 MW of installed wind and solar generation projects.

Clearway Energy Group owns or has an interest in more than 7 gigawatts of wind, solar and energy storage assets, and an ongoing development pipeline across the U.S. The group’s large renewable power generation offsets about 10.5 million metric tons of carbon emissions.

We estimate that CWEN can grow cash available for distribution, or CAFD, by roughly 3.0% annually over the intermediate term. The Clearway Group will lead the corporation into significant growth opportunities as they have a near 30 GW development pipeline. Rate increases and further acquisitions of existing renewable energy projects will add to CAFD per share. The corporation also aims to lower annual interest expenses as they plan to deleverage by about $350 million annually.

The company’s payout has remained conservative on a CAFD per share basis with a dividend payout ratio of approximately 54%. We believe utilities businesses are generally one of the safer industries during a recession. Company results were not highly impacted by the COVID pandemic as power generation is essential. CWEN believes its knowledge and operating expertise to be its prime competitive advantage in the industry, as it allows it to make strong energy acquisitions, which it can utilize to grow CAFD. CWEN stock currently yields 6.8%.

At the time of publication, Bob Ciura had no position in the securities mentioned.