Dividend stocks have historically delivered the best total returns. The average dividend stock has generated an average annual total return of 12.79% over the past several decades, -- with dividend growers delivering an even better 12.87% total return -- both of which are ahead of the S&P 500's 12.29% total return. While that slight difference might not seem like much, it adds up over the decades.
Because of that long-term outperformance, investors should consider putting some dividend growth stocks into their portfolios. Three great ones to buy before 2021 are renewable energy producers Brookfield Renewable (BEP -5.98%) (BEPC -5.10%), Clearway Energy (CWEN -6.66%) (CWEN.A -6.68%), and NextEra Energy Partners (NEP -16.70%). All three offer above-average current yields and attractive growth forecasts.
Plenty of power to continue the upward trend
Brookfield Renewable has a long history of growing its dividend and outperforming the market. Since its inception about 20 years ago, the hydroelectricity producing giant has increased its dividend at a 6% compound annual rate. That's helped power market-crushing total yearly returns of 19% compared to just 6% for the S&P 500 during that timeframe.
The company should have plenty of power to continue growing its dividend in 2021 and beyond. Brookfield currently anticipates that a combination of higher power rates, cost reduction initiatives, and renewable energy development projects will enable it to grow its cash flow per share at a 6% to 11% annual rate through at least 2025. On top of that, it believes that acquisitions can add another 4% to 5% to its bottom line each year. That supports its expectation that it can grow its nearly 3%-yielding dividend at a 5% to 9% annual rate over the long-term.
Charging up the dividend growth engine
Clearway Energy provided a jolt to its dividend this year. It has raised the payout three times, boosting it by 59% and pushing the yield close to 4%. Powering that fast-paced growth was a dividend reset after a key customer emerged from bankruptcy, which had previously forced it to slash the payout last year. On top of that, the company completed several acquisitions.
Clearway has a few more deals already in the pipeline, giving it increasing confidence in its ability to deliver 5% to 8% annual dividend growth. On top of that, it has a relationship with a renewable energy project developer, giving it a clear line-of-sight on additional future investment opportunities. Meanwhile, with its dividend payout ratio currently below its target range and several deals on track to close in the coming year, Clearway anticipates that it can achieve the high-end of that forecast in 2021.
Supercharged dividend growth ahead
NextEra Energy Partners has been growing its dividend at a fast pace. Since its creation in 2014, it has increased its payout each quarter, boosting it by an eye-popping 217% overall. That's helped it produce powerful total returns of 220% since its IPO, which has obliterated the S&P 500's 112% total return during that timeframe.
The company sees lots of dividend growth ahead. It currently expects to expand its 5.6%-yielding payout at a 12% to 15% annual pace through at least 2024. It already has enough power to deliver next year's boost thanks to recent acquisitions while keeping its dividend payout ratio within its target range. Meanwhile, it has ample future growth opportunities thanks to its relationship with leading global renewable energy producer NextEra Energy (NEE -8.97%). NextEra Energy Partners looks likely to deliver on its ambitious dividend growth plan.
A bright future for these dividend stocks
Brookfield Renewable, Clearway Energy, and NextEra Energy Partners generate steady income as they sell renewable energy to end-users under fixed-rate contracts. Meanwhile, they have ample power to continue growing their payouts for the next several years because the renewable energy industry is on track to expand at a 15% annual rate through at least 2030. That should enable them to produce market-beating total returns, making them great income stocks to buy and hold for the long haul.