There are many ways to invest in energy and dividend stocks. This trio covers a lot of the common ground between these two different themes. So if you are looking to add some dividend power to your portfolio, you should take a close look at Dominion Energy (D 0.52%), NextEra Energy (NEE 0.34%), and Brookfield Renewable (BEPC 1.56%).
1. Dominion Energy: Boring and reliable
At one point in its past, Dominion Energy owned everything from an oil drilling business to a utility operation. Today, having sold its drilling and most of its midstream assets, the company is a pretty typical electric utility. That said, the last big asset sale, in which Dominion offloaded its midstream operations to Berkshire Hathaway, came with a 33% dividend cut. That isn't shocking, since the midstream operation accounted for about that much of its business.
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The key here, however, is that selling those assets de-risked and simplified the company's business. The future here is far more certain, given that its regulated operations have to get investment plans and rate hikes approved by the government.
Right now, the stock yields a fairly generous 3.1%. And management expects to be able to grow earnings by around 6.5% annually through 2026, with dividend growth following along at a roughly 6% clip. Since regulators are involved in all the spending that backs these plans, it is highly likely that Dominion will live up to these stated goals. You probably won't brag about Dominion at your next cocktail party, but it can provide a solid cornerstone to a diversified dividend portfolio.
2. NextEra Energy: Focused on growth
NextEra Energy also operates a boring utility -- which just so happens to be the largest in the United States. It basically has similar traits to Dominion in this regard. However, there's another piece to NextEra's operations that sets it apart from the pack -- it is one of the largest producers of electric and wind power in the world. Basically, NextEra has built a massive clean energy business on top of its boring, reliable regulated utility operation.
Growth on the renewable energy side is expected to be very material. The company has 28 gigawatts of clean energy capacity today but hopes to expand that sum by another 30 gigawatts by 2024. That's pretty exciting, but even more enticing is the fact that NextEra has increased its dividend at an annualized clip of more than 10% for over a decade. It expects that its growth plans will allow it to keep that pace up at least through 2024.
The dividend yield is a fairly modest 2.1%, but dividend growth investors might still find it extremely attractive.
3. Brookfield Renewable: Going all-in on clean energy
Brookfield Renewable is solely focused on clean energy. The core of its portfolio is a huge collection of hydroelectric assets, which account for about half of its business. The rest of its portfolio is spread across solar, wind, and energy transition assets, which includes things like energy storage. It's a fairly diversified way to play the clean energy transition, noting that hydro is an old technology capable of providing base-load power, just like a natural gas or coal-fired power plant.
On top of this diversification, the company has operations in North America, South America, Europe, and Asia. It's a one-stop-shop for investors looking to add some clean energy exposure to their portfolio.
That said, the stock currently offers a yield of around 3.4%. This is not too shabby on its own. But Brookfield Renewable also has a stated goal of increasing the dividend by between 5% and 9% a year.
Brookfield Renewable is an active manager, so it is always buying, building, upgrading, and selling assets. But it has historically lived up to that pledge, with a roughly 6% dividend growth rate over time. Income investors looking to focus on clean energy will likely find this company a nice mix of income and growth.
Something for every dividend investor
It is unlikely that you'll like all three of these dividend stocks enough to add the entire crew to your portfolio. However, if you are looking for a boring cornerstone income stock, Dominion Energy could be a nice fit for you. NextEra Energy would fall into the dividend growth space, though investors should note that it is often afforded a premium to its peers. And for those looking for clean power, income, and income growth, Brookfield Renewable would be the name to examine.
