It's nearly impossible to predict the future. However, it's becoming abundantly clear that the world is transitioning to lower-carbon energy sources like renewables. That switch will take decades to complete and billions of dollars of investments.
We can reasonably assume that companies focused on producing clean energy can generate growing cash flow streams for years to come. That will give them more money to pay dividends and invest in expanding their businesses. Brookfield Renewable (BEP 0.13%)(BEPC +0.00%), Clearway Energy (CWEN +0.46%)(CWEN.A +0.23%), and NextEra Energy Partners (NEP 1.88%) are three leading renewable energy dividend stocks. That puts them in an excellent position to supply their investors with a lifetime of dividend income.
The potential for high-powered growth in the coming years
Brookfield Renewable currently offers a 4.1% dividend yield, which is more than double the yield on the S&P 500 (recently around 1.6%). The company has an excellent track record of paying dividends. It has increased its payout by at least 5% annually since its public market listing 12 years ago, including by 5.5% earlier this year.
The leading global renewable energy producer expects to grow its payout by 5% to 9% annually over the long term. It has multiple levers to drive growth:
Image source: Brookfield Renewable.
As that slide showcases, a quartet of catalysts could power upwards of 20% annual growth in its funds from operations (FFO) per share through 2027. The company has already secured and funded at least 8% annual growth, giving it lots of visibility into dividend growth.
It has been very active in making new investments this year, further enhancing its growth prospects. It recently agreed to invest in the privatization and decarbonization of Australian utility Origin Energy and acquire Duke Energy's commercial renewable energy platform. These accretive deals will boost its FFO and enhance its long-term growth profile.
NYSE: BEP
Key Data Points
High-end growth secured
Clearway Energy's dividend yield is currently 5.1%. The clean energy producer targets to increase its payout by 5% to 8% per year over the longer term. It sees dividend growth in the upper end of that range through 2026.
Powering that high-end outlook is its capital recycling strategy. Clearway sold its thermal assets last year, generating nearly $1.4 billion in cash proceeds. It has secured deals to put all that capital to work on higher-returning investments that should close by the end of next year. That will increase its cash available for distribution to more than $2.15 per share in the future, giving it lots of room to grow the dividend from its current level of $1.5272 per share.
NYSE: CWEN
Key Data Points
Meanwhile, Clearway has ample growth potential beyond 2026. It recently committed to invest $63 million to repower its Cedro Hill wind facility, which will provide incremental cash flow when that project comes online to help drive post-2026 dividend growth. Clearway also has strategic relationships with a leading renewable energy developer (Clearway Energy Group), a top private equity fund (Global Infrastructure Partners), and a global energy giant (TotalEnergies). They can provide it with new investment opportunities in the coming years to drive dividend growth.
Refocusing on renewables
NextEra Energy Partners' dividend currently clocks in at 5.4%. The company has increased that payout by 350% since its formation in 2014. That high-powered growth is showing no signs of stopping. NextEra plans to grow it at an eye-popping 12% to 15% annually through at least 2026.
Its strategic relationship with leading utility NextEra Energy (NEE 0.12%) is a big factor powering that plan. That company has an extensive and growing portfolio of renewable energy assets it can drop down to its affiliate. Those transactions enable NextEra Energy to recycle cash into new developments while providing the partnership with additional income-producing renewable energy projects.
NYSE: NEP
Key Data Points
NextEra Energy Partners recently revealed it would focus solely on renewable energy in the future by selling its natural gas pipeline operations. Those deals will enhance its financial flexibility, allowing it to continue investing in cash-flowing renewable energy projects to grow its dividend.
The power to continue paying rising dividends
Brookfield Renewable, Clearway Energy, and NextEra Energy Partners are leaders in producing renewable energy, which they sell to utilities and corporate buyers under long-term contracts. Those agreements supply them with steadily rising cash flow to support their dividends. Meanwhile, the companies continue expanding their portfolios by investing in additional cash-flowing clean energy assets. Their strategic focus on the renewable energy megatrend should enable these companies to provide their investors with a potential lifetime of dividend income.
