The renewable energy industry is increasingly replacing fossil fuels with new forms of electricity and fuel generation. Wind and solar energy are beating coal and natural gas based on the cost of electricity produced, and energy storage and hydrogen are increasingly competitive as well. That opens a great environment for investment for companies that are looking to generate a yield from renewable energy projects. 

As we look at renewable energy dividend stocks overall, three companies are industry leaders that we think could be dividend giants for decades. Brookfield Renewable Partners (BEP -1.66%)Atlantica Sustainable Infrastructure (AY -0.57%), and NextEra Energy (NEE -1.24%) are those companies and that's why they're our best high-yield renewable energy stocks today. 

Large solar farm on a large grassy hill.

Image source: Getty Images.

As steady as it gets

Travis Hoium (Brookfield Renewable Partners): The best long-term business in renewable energy has proven to be asset ownership. Renewable energy projects usually come with 10-25 year contracts to sell electricity to utilities, businesses, or homeowners. That allows owners to finance them with debt and equity, and in this case, in the form of dividend-paying stocks. 

Brookfield Renewable Partners is one of the industry's biggest renewable energy asset owners with 21,000 megawatts of projects around the world. The company aims to generate annualized returns of 12% to 15% through organic growth in distributions of 5% to 9% and some price appreciation in the stock. 

Based on recent dividends paid, the stock yields 3.2% and over time that should grow. You can see below that the dividend won't rise in a straight line, but it's trending higher. In the last year and a half, dividends paid are down partly because of a split of BEP and BEPC stock and a 3-for-2 stock split. Without those events, dividends per share would be steadily higher, continuing a decade-long trend. 

BEP Chart

BEP data by YCharts

As steady as dividend growth has been from a company like Brookfield Renewable Partners, there are also risks for renewable energy projects that shouldn't go overlooked. Right now, hydro assets are underperforming expectations because of drought conditions around the world, especially in Brazil. If climate change results in less snowfall and ultimately less river flow, hydro assets could feel it first and that's a big part of Brookfield Renewable Partners' business. On the flip side, less rain and more sun could mean solar projects outperform expectations long term, so there's value in being a diverse and large asset owner. 

I think the stability and know-how of Brookfield Renewable Partners makes it a great long-term dividend stock. And with new opportunities emerging in energy storage and hydrogen, it could grow organically for over a decade, making a 3.2% dividend yield today much smaller than we should expect in coming years. 

A diverse set of assets

Howard Smith (Atlantica Sustainable Infrastructure): More and more companies in a wide range of industries are signing power purchase agreements with renewable energy generators to power their facilities and ensure products can be made and sold sustainably. Companies like Atlantica Sustainable Infrastructure that own or invest in that power generation are benefiting and growing from this movement. And those benefits are being shared with investors in the form of a high-yielding dividend

Atlantica can feel confident in promising to share the cash flow because 100% of its assets are contracted or regulated. Though it retains some cash for growth opportunities, it aims to pay shareholders 80% of generated cash. And it has been consistent growing those dividend payments in the past. Its quarterly dividend has increased by 65% in the past four years. That growth should continue as cash available for distribution increased by 12.9% in the first half of 2021. 

Atlantica's business is spread among North America, South America, and the Europe, Middle East, and Africa region. The company owns renewable energy installed generation capacity, efficient natural-gas-fired generation capacity, electric transmission lines, and water desalination plants. Almost 75% of Atlantica's revenue came from its renewables sector in 2020.

And 2021 is starting out strong. The company's continued investments in renewable energy assets have driven its megawatts in operation to grow 30% in the first half of 2021 compared to 2020's first half. 

The stock looks inexpensive from a price-to-free cash flow perspective, compared to peers with similar strategies. 

AY Dividend Yield Chart

AY Dividend Yield data by YCharts

With a dividend yielding over 4.3%, now looks to be a good time to buy Atlantica as support for growing the renewable energy sector continues to expand. 

A core business, long-term upside, and a dividend to boot

Daniel Foelber (NextEra Energy): The stock market is near an all-time high but the average dividend yield in the S&P 500 is near a 10-year low. This can make finding high-quality dividend stocks a challenge, especially in the renewable energy space where many stocks don't pay dividends. Large utilities like NextEra Energy are a great way to invest in the growth of renewable energy while earning income too.

NextEra Energy just had an impressive quarter. Its portfolio consists of natural gas, solar, wind, and other assets, giving it diverse revenue streams that allow it to weather the ebbs and flows of the energy market.

Its established presence as Florida's leading utility -- through Florida Power & Light and Gulf Power -- provides the bulk of its revenue and net income. A strong foundation from this profitable business paired with access to inexpensive debt has allowed NextEra to grow its renewable energy investments, mainly through its NextEra Energy Resources division. Today, the company is the largest producer of wind and solar energy in the U.S. But it's not just about capacity.

NextEra's head start in the energy transition gives it a leg up over other utilities since it has had time to build relationships, fill out its supply chain, refine its logistics, and tackle a variety of projects in different markets. This experience may not show up on financial statements, but it has intangible value that plays into the stock's broader investment thesis.

NextEra's long-term game plan is to generate predictable revenue (mostly from renewables) via long-term contracts and distribute a portion of earnings to investors through a dividend. In this way, NextEra Energy is a textbook example of a balanced renewable energy stock that can round out any portfolio. Earlier this year, the company raised its quarterly dividend to $0.385 per share, representing a 1.9% annual yield at the time of this writing. 

Built to last

The theme with all of these companies is that they're big, diverse renewable energy asset owners with long-term contracts to sell electricity to utilities or other end customers and that fuels their dividends. As long as the renewable energy industry continues to grow and there are assets to buy at attractive yields, these are great dividend stocks to buy and hold while you simply collect a dividend.