Nations and companies worldwide will need to invest trillions of dollars in the coming years to switch our energy sources from carbon dioxide-emitting fossil fuels to cleaner alternatives. It will take decades to make this energy transition. Megatrends this big only come along once in a generation.
Many companies are working to capitalize on this enormous opportunity. Three emerging leaders in the green energy space are Brookfield Renewable (BEPC +0.00%)(BEP 2.11%) Clearway Energy (NYSE: CWEN) (NYSE: CWEN.A), and NextEra Energy Partners (NEP 2.83%). They're all great renewable energy stocks to buy for the long haul, and if you have $3,000 in idle cash that you're looking to invest, I'd recommend spreading it equally across all three.
Powerful total return potential
Brookfield Renewable is a global leader in renewable energy. It operates one of the world's largest publicly traded pure-play renewable power platforms, consisting of hydroelectric, wind energy, solar, and storage capabilities across North and South America, Europe, and Asia.
Brookfield sells its power under long-term, fixed-rate agreements to corporate buyers and electric utilities. That enables it to generate predictable cash flows. It pays out a large portion of those funds via its dividend, which currently yields around 4%, and retains the rest to fund its continued expansion. To put that yield into perspective, a $1,000 investment would produce about $40 of annual dividend income at that rate.
NYSE: BEPC
Key Data Points
The company expects a combination of inflation-linked rate increases, higher power prices, development projects, and acquisitions to power double-digit percentage growth in cash flow per share annually through at least 2027. Brookfield has already secured and funded the sources of 8 percentage points worth of this growth. Because of that, the company should have no problem delivering on management's goal of growing the dividend at a 5% to 9% annual rate. Brookfield believes its combination of dividend income and earnings growth should enable it to achieve its goal of producing 12% to 15% total annualized returns for its shareholders over the long term. At rates in that range, Brookfield could double an investor's money in about six years.
High-end growth already lined up
Clearway Energy is one of the largest renewable energy producers in the U.S. It also operates a portfolio of highly efficient natural gas power plants. These assets generate predictable cash flow backed by long-term power purchase agreements with utilities and corporate buyers. That gives Clearway steady income with which to pay its dividend, which at the current share price yields more than 4%.
NYSE: CWEN
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The company has set a target of growing its payouts by 5% to 8% annually through 2026, and management expects those hikes to land near the upper end of the target range. Powering that high-end outlook is the company's capital recycling program. Clearway sold its thermal assets for $1.35 billion of net proceeds earlier this year. It has already used some of that money to fund about $670 million of new investments. Meanwhile, it has lined up deals for the remaining proceeds that it expects to close in the coming years.
These investments should grow its annual cash available for distribution to more than $440 million over the next few years, up from $336 million in 2021, including its thermal assets' contribution. Meanwhile, the company should have plenty of opportunities to continue growing. Its parent company, Clearway Energy Group (CEG), is a leading renewable energy project developer with a vast pipeline of projects. Meanwhile, French energy giant TotalEnergies (TTE +0.00%) recently bought a 50% stake in CEG. That could give both companies more power to grow while helping TotalEnergies achieve its lower-carbon energy targets.
High-powered dividend growth ahead
NextEra Energy Partners owns a rapidly growing clean energy infrastructure portfolio, including wind and solar power generating facilities and natural gas pipelines. These assets provide it with stable, long-term cash flows. It uses that money to support a dividend that at the current share price yields 4.1%.
NYSE: NEP
Key Data Points
NextEra Energy Partners expects to grow that payout at an eye-popping 12% to 15% annual rate through at least 2025. Underlying that outlook is its plan to continue buying income-producing clean energy infrastructure. The company has steadily purchased such assets from its parent, utility NextEra Energy (NEE +1.21%), and third-party sellers.
NextEra Energy has a vast portfolio of operating assets and development projects it can drop down to its affiliate over the coming years. The two companies have already teamed up on a couple of deals this year, which will help fuel its dividend growth in 2023.
Plugged into a powerful trend
Brookfield Renewable, Clearway Energy, and NextEra Energy Partners have large and growing renewable energy portfolios. That will supply these companies with steadily growing cash flows to continue increasing their dividends. That combination of income and growth should enable these companies to produce powerful total returns in the coming years, making them great renewable energy stocks to buy for the long haul.
