Clearway Energy (CWEN 2.21%) (CWEN.A 2.07%) offers investors an attractive passive income stream, with the clean-power producer currently yielding 4%, more than double an S&P 500 index fund.

But Clearway's high dividend yield isn't the only draw. The company expects to raise that payout toward the high end of its 5% to 8% annual target range through at least 2026. And it's increasingly likely to achieve that goal, given all the opportunities it has lined up. 

Still strong despite a small setback

Clearway Energy recently updated investors on the progress of its strategic growth plan when it reported its third-quarter results. While its earnings in that period came in a little lighter than expected due to unplanned outages at its El Segundo Energy Center near Los Angeles, that setback won't have a long-term impact.

After adjusting for that downtime, Clearway expects to generate $350 million of cash available for distribution (CAFD) this year, about $15 million less than its prior outlook. That's still plenty of cash to cover its current dividend outlay, which has averaged around $71 million per quarter ($285 million annualized) this year. 

That gave the company the confidence to increase its dividend by another 2% in the third quarter. With its latest increase, Clearway's dividend is up 8% from a year ago, meeting the top of its long-term target range. 

The power to continue growing

And Clearway Energy has increasing confidence that it can continue to deliver on that long-term dividend growth target because of its progress in putting its financial flexibility to work. The company sold its thermal assets for $1.35 billion of net proceeds earlier this year, giving it a lot of capital to deploy in expanding its renewable energy operations. 

Clearway had previously lined up over $600 million of investments and has already funded all but $39 million of those commitments. That left it with about $750 million to allocate.

It now has a line of sight on projects to put those remaining proceeds to work. Clearway secured and closed the acquisition of a 414-megawatt (MW) wind energy portfolio in the quarter. It expects its ultimate capital commitment to be between $110 million and $130 million after it completes the funding of that transaction. Meanwhile, it has received two offers from its parent company -- renewable energy developer Clearway Group -- for two potential drop-down transactions. 

It had previously been offered a chance to invest about $220 million in projects that would come on line in the 2023 to 2024 time frame. And in October, it was presented with an opportunity involving another portfolio of wind, solar energy, and solar-plus-storage projects that will reach commercial operations between the second half of 2023 and the end of 2024. It could invest about $410 million in that deal.

These offers give Clearway a significant chance to achieve its growth targets. The company estimates it will generate $410 million of CAFD in 2023 as it benefits from transactions closed this year. Meanwhile, it has the potential to grow its annual CAFD run rate up to more than $440 million, assuming it closes both transactions with Clearway Group. That would increase its CAFD to more than $2.15 per share, supporting the company's ability to grow its annual dividend (currently $1.469 per share) toward the upper end of its 5% to 8% target range each year through 2026.

And Clearway should be able to keep boosting its payout beyond 2026. It has a solid financial profile, giving it the flexibility to make more investments. And it should have no shortage of opportunities since Clearway Group has an extensive pipeline of renewable energy projects under development.

Meanwhile, global energy giant TotalEnergies (TTE 1.45%) recently bought a 50% stake in that company. That deal will enhance Clearway Group's growth prospects and TotalEnergies' lower-carbon ambitions. As part of that deal, Clearway Energy also received the right of first offer to buy renewable energy projects in the U.S. developed by TotalEnergies, giving it another vast opportunity. 

A potentially powerful passive income source

Clearway Energy offers income investors a high yield, and after a successful third quarter, the clean-energy producer has the means to meet its most-generous dividend targets for the next several years. That makes it a great option for those seeking an attractive passive income stream, especially one powered by sustainable energy.