Clearway Energy (CWEN 1.19%) (CWEN.A 1.51%) continues to demonstrate it's one of the best renewable-energy dividend stocks. That was evident in the clean energy producer's second-quarter results. Not only is it on track to deliver on its cash flow guidance for 2021, but it also continues to make progress on securing the investments needed to keep growing its dividend in the future.
A closer look at Clearway Energy's second-quarter results
Clearway Energy delivered solid second-quarter results, generating $155 million of cash available for distribution (CAFD). That's up 80% year over year and right in line with its expectations. The company benefited from recent acquisitions, improved renewable-energy conditions on the West Coast compared to the year-ago period, and higher sales volumes from its thermal assets. Clearway's cash flow also benefited from the timing of interest payments after it refinanced some debt.
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Clearway's renewables segment generated 3,370 megawatt-hours of electricity in the second quarter, up 49% year over year. The company benefited from acquiring a 35% interest in the Agua Caliente solar project and an additional interest in its distributed generation partnerships, which are energy produced near end users like rooftop solar. Meanwhile, sales volumes from its thermal assets increased by 16% because of favorable weather conditions and the effects of the pandemic last year.
A look at what's ahead for Clearway Energy
Clearway Energy's solid showing in the second quarter has it on track to achieve its full-year guidance to produce $325 million, or $1.61 per share, of CAFD. That's despite the impact of winter storms in Texas during the first quarter, which cost it $25 million in revenue.
As a result, Clearway remains on track to deliver on its dividend growth target. The company currently expects to increase its dividend toward the upper end of its 5% to 8% annual growth target by year-end. It has already increased its dividend three times this year, including 1.7% for the third quarter.
Longer-term, Clearway continues to forecast 5% to 8% annual dividend growth through 2023. It has already secured new investments to boost its CAFD to $395 million, or $1.85 per share, over the coming years. It's investing $238 million through the first half of 2023 to co-invest in a 1.6-gigawatt portfolio of wind and solar energy projects currently under development by its sponsor, Clearway Energy Group (CEG). It has funded $19 million of that investment to date and will pay the remaining balance as it closes this investment in phases over the next couple of years. In addition, the companies are working to repower the Pinnacle Wind Project, which should wrap up in the second half of this year.
Meanwhile, Clearway Energy is already lining up its next set of investment opportunities. It's currently evaluating an option to purchase a 50% interest in several community solar projects, invest in a solar fleet expansion in Texas, and another co-investment for a 1.1-gigawatt wind/solar/storage portfolio CEG has under development. These projects would come online in the late 2022 to 2024 timeframe, providing even more visibility into future dividend growth.
Clearway is also considering the sale of its thermal assets. These include district energy, combined heat and power, and microgrids. It could reinvest the proceeds from the sale of its thermal platform into higher returning renewable energy investments. Its success in recycling capital by selling its thermal assets and reinvesting those funds into new opportunities could enable it to grow its CAFD at an even faster rate in the coming years. That could support dividend growth toward the high end of its outlook while extending its visibility beyond 2023.
A great option for income-seeking investors
Clearway Energy is becoming an excellent dividend stock. The renewable energy producer offers an attractive yield (currently 4.5%) and solid growth prospects, given its aim to increase the payout by 5% to 8% per year through 2023. With that forecast remaining firmly on track during the second quarter, Clearway is a great way to generate passive income from renewable energy.
