The energy sector is on fire. On one hand, oil stocks are crushing earnings estimates on booming cash flows thanks to rising crude oil prices. On the other, clean-energy stocks are getting more investor interest than ever as governments around the globe are pledging to switch to renewable energy.

It's been a double-dip advantage for investors in energy, as not only are stocks rallying but many are also returning boatloads of cash to shareholders in the form of dividends. In fact, some energy stocks are on track for exponential dividend growth but are still trading cheap. Here are three such top energy dividend stocks to consider buying this month.

Who wants a dividend increase every quarter?

Clearway Energy (CWEN -1.11%) (CWEN.A -0.80%) is one heck of a dividend stock, and there's still time for you to buy this 4.3%-yielding stock before it's too late. If the stock's 19% run up in the last one month makes you think it's expensive, consider this: Clearway Energy's cash from operations (CFO) is at its highest ever, but the stock is still almost 20% away from its 52-week high as of this writing.

Two men analyzing price charts on a large screen.

Image source: Getty Images.

What's important to understand is that rising CFO also means more cash available for distribution (CAFD) among shareholders as dividends. So Clearway Energy expects to generate $395 million in CAFD in 2021 based on its renewable-energy production estimates and consequently increase its dividend by 5%-8% this year. In fact, management expects to hit the higher end of that range this year, and it's splitting the increase quarterly -- so far, Clearway Energy has increased its dividend by 1.5% and 1.7% in its first and second quarters, respectively.

CWEN Chart

CWEN data by YCharts

Clearway Energy is among the largest renewable-energy companies in the U.S., with more than 4.2 gigawatts (GW) of wind and solar power generation capacity and nearly 16 GW of development pipeline. It is expanding its portfolio at a steady pace, and in doing so, it is not only setting itself up to benefit from the global transition to cleaner fuels but is also paving the path to bigger shareholder returns. Management, for example, is confident of growing its dividend by 5%-8% annually, not just this year but through 2023, making Clearway Energy an attractive high-yield energy stock to own.

This company last increased its dividend by 44%: The next one could be even bigger

Devon Energy's (DVN 0.77%) dividend payout could grow substantially as the year progresses, but the stock isn't getting its due. That's the kind of opportunity you want to seize.

Devon Energy was the first to introduce a fixed-plus-variable dividend policy in the oil and gas industry, and here's where its present dividend policy stands: On top of a fixed quarterly dividend of $0.11 per share, it's paying out up to 50% of any incremental free cash flow (FCF) remaining after covering its fixed dividend. So in its second quarter, for example, Devon Energy paid a fixed dividend of $0.11 per share and a variable dividend of $0.38 a share over and above that, effectively boosting its quarterly payout by a whopping 44% sequentially.

I'll give you four big reasons you should consider buying Devon Energy shares right away:

  • Its third-quarter dividend could be even bigger as some of Devon Energy's oil hedges end amid rising oil prices, which should effectively bring in much higher FCF.
  • If Devon's stock remains undervalued, management will consider repurchasing shares, which should boost the stock price.
  • Devon Energy is using the remaining 50% incremental FCF to reduce debt, and it's about to reach its debt target. Once it does, it'll probably return even more FCF to shareholders.
  • Management is already contemplating increasing its fixed dividend payout next year.

In short, Devon Energy may be yielding only 1.4% and therefore not getting much love, but its aggressive dividend policy could mean massive returns for shareholders.

Here's a mega-energy deal you don't want to miss

You may not think about Brookfield Infrastructure (BIP 0.56%) (BIPC 1.83%) when you think energy stocks, but the company derived 50% of its funds from operations (FFO) from the midstream oil and gas industry and utilities over the trailing 12 months. Remember, Brookfield Infrastructure is yet to acquire Canada-based energy infrastructure company Inter Pipeline (IPL), which means its midstream exposure is all set to grow bigger, making it an offbeat yet compelling energy dividend stock to buy.

Brookfield Infrastructure has a solid dividend track record, having increased its dividend every year since 2009. Even better, its dividend has grown at an impressive compound annual growth rate of 10% over the period, driven by 15% CAGR in FFO per share, which is why long-term shareholders have been able to reap such rich returns from owning Brookfield Infrastructure shares so far. The best, however, is yet to come.

BIP Chart

BIP data by YCharts

You see, Brookfield Infrastructure's FFO is exploding. Its contracted backlog value is now more than $2 billion, the company has a massive asset base that generates steady cash flows under regulated or contracted agreements, and management aims to pay out 60%-70% of its FFO in dividends. That could translate into some really big returns for shareholders if Brookfield Infrastructure acquires Inter Pipeline -- it is currently actively pursuing the energy company. With a deal likely anytime soon, this 3.6%-yielding stock is a solid buy right now.