The energy sector has been a tough one for investors in recent years. Commodity price volatility, oversupply, and poor investment decisions have yielded abysmal results for most energy stocks. For example, over the past decade, the Energy Select Sector SPDR ETF -- which holds 26 major energy stocks -- has produced a total return of negative-33%, getting absolutely crushed by the S&P 500's nearly 240% total return.
However, not all energy stocks have delivered poor performance during the past decade. Two standouts are Brookfield Renewable (BEP -2.52%) (BEPC -1.57%) and NextEra Energy (NEE -0.52%). Their past success, combined with what they see ahead, make them great energy stocks to park a few thousand dollars in with the intention of holding for the next several years.
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More high-powered growth ahead
Brookfield Renewable has created enormous wealth for its investors over the years. Since its inception roughly two decades ago, the renewable energy producer has generated average annual total returns of 18%, absolutely obliterating the S&P 500's 6% average annual total return during that timeframe. Powering that value creation has been the company's ability to steadily expand its portfolio, cash flow, and dividend. It has grown the latter at a 6% compound annual rate over the past 20 years.
While past success is no guarantee of future results, Brookfield expects more of the same. The company anticipates growing its cash flow at an 11% to 16% annual rate through 2025, powered by higher renewable power rates, an extensive development project backlog, and additional acquisitions. That should enable the company to grow its 3.6%-yielding dividend at a 5% to 9% annual rate. Meanwhile, it should have plenty of growth beyond that timeframe because of its rapidly expanding development pipeline and the accelerated shift toward renewable energy. It should have plenty of power to continue producing market-beating total returns, which it expects will be in the range of 12% to 15% per year.
Leading the charge
NextEra Energy has also done an exceptional job enriching its investors in recent years. Over the last decade, the utility has generated a total shareholder return of 530%, which has blown past the S&P 500 (257%) and the S&P 500 Utility Index (205%). Powering that superior performance has been NextEra Energy's steady earnings and dividend growth, which have expanded at 8.4% and 9.4% compound annual rates, respectively, since 2004.
The renewable energy-focused utility sees more high-powered growth ahead. It recently increased and extended its earnings growth forecast. The company boosted its 2021 earnings outlook to a more than 10% year-over-year increase and now anticipates growing its earnings at a 6% to 8% annual rate through 2023 off of that higher base. Even better, the company said it would be disappointed if it didn't deliver growth toward the higher-end of that outlook. Meanwhile, it expects to increase its 1.9%-yielding dividend by a roughly 10% annual pace through at least 2022.
Looking further ahead, the utility should have no problem continuing to grow at a high-powered rate. For starters, it expects renewable energy development to accelerate in the coming years because of rapidly falling costs. Meanwhile, it's an early leader in emerging clean energy technologies like battery storage and green hydrogen, with the latter a potentially massive market opportunity. Given its extensive track record of creating value from clean energy, its future looks even brighter than its recent past.
Investors could make a lot of green by going green
While most energy stocks have been terrible investments in recent years, renewable energy-focused companies Brookfield Renewable and NextEra Energy have been among the few bright spots. Given the accelerating shift toward clean energy, these companies could do even better in the future. Investors with a few thousand dollars lying around should consider parking it in these stocks and holding on for the long haul.
