The stock market has gotten off to a rocky start in 2022. It corrected last month, declining by 10% from its recent high. While market sell-offs are challenging, they do provide opportunities for long-term investors.
One of the benefits of lower stock prices is that it pushes up the yield on dividend-paying stocks. That enables investors to collect more passive income over the long term. With the energy sector known for paying above-average dividends, it's offering investors several appealing options this month. Three that stand out are Brookfield Renewable (BEPC 0.60%) (BEP 0.52%), Atlantica Sustainable Infrastructure (AY -0.18%), and NextEra Energy (NEE 0.34%).
The steady dividend growth continues
Shares of Brookfield Renewable fell about 6% last month, pushing its dividend yield to 3.6%. That's well above the market's current average of around 1.3%.
That slump came even though the renewable energy producer locked up more growth last month. It agreed to acquire clean power developer Urban Grid, adding a massive backlog of development projects.
Meanwhile, Brookfield Renewable had more good news for its investors in February. The company reported strong fourth-quarter results, highlighted by the continued strength of its hydropower operations.
Brookfield also announced a 5% dividend increase. That marked the 11th consecutive year the company has given its investors a raise.
Brookfield sees more dividend growth ahead, targeting 5% to 9% growth over the long term. It has plenty of power to support that forecast between rising power prices, its growing scale, and its extensive development pipeline. With shares now cheaper and offering a higher dividend yield following last month's decline, Brookfield Renewable stands out as a great renewable energy dividend stock to buy this month.
A high yield with healthy growth ahead
Shares of Atlantica Sustainable Infrastructure tumbled roughly 9% in January, driving its dividend yield up to 5.5%. Aside from market volatility, the other factor weighing on Atlantica's stock last month was an analyst downgrade. Morgan Stanley cut its rating from overweight to equal weight while reducing its price target from $44 to $39 a share. Analyst Stephen Boyd wrote that he views Atlantica as the most attractive risk-adjusted yieldco compared to NextEra Energy Partners (NEP 1.70%) and Clearway Energy (CWEN 0.12%) (CWEN.A -1.40%). However, he believes the stock offers less upside potential than others in the alternative energy sector following the recent sell-off in clean energy stocks.
That view aside, Atlantica offers a pretty compelling value proposition for dividend investors. It expects to grow its cash available for distribution by a 5% to 8% annual rate through 2024, powered by organic growth, development projects, and third-party acquisitions. It needs to invest about $300 million annually to support that growth target. It was well ahead of that pace in 2021, investing $465 million across six transactions, including several wind farms, solar energy projects, and a geothermal power plant.
That growing cash flow should provide Atlantica with the power to continue increasing its dividend. Add the yield to its growth rate, and the company should be able to produce double-digit total annualized returns over the long haul.
A surprising change has this industry leader looking more attractive
Shares of utility NextEra Energy tumbled 16% last month. While the sell-off in clean energy stocks weighed on the company, the other big factor was the announcement that longtime CEO Jim Robo was stepping aside, which caught investors by surprise. That slump pushed NextEra's dividend yield up to 2%.
While Robo has been instrumental in leading NextEra's transformation over the last decade into an industry-leading clean energy giant, he's leaving the company in good hands. He's also leaving it in an excellent position to continue creating value for shareholders. This year, the company expects to deliver 10% earnings-per-share growth. Meanwhile, it sees growth at or near the upper end of its 6% to 8% target range from 2023 through 2025.
NextEra Energy should have plenty of power to continue growing its dividend. It has already delivered 25 years of dividend growth, qualifying it for the elite designation of Dividend Aristocrat.
Use market volatility to your advantage
Last month's stock market sell-off pushed up the dividend yield on several high-quality clean energy stocks. That higher yield makes them look more attractive, especially when adding their growth prospects. That combination makes them look like compelling buys for dividend-seekers this February.