What happened
It is a choppy market for energy companies, and Clearway Energy (CWEN 3.48%) is no exception. Shares of Clearway are down about 5% on Monday after Evercore ISI lowered its price target for the company.
So what
Clearway is one of the largest producers of renewable energy in the U.S., producing upward of 8 gigawatts of energy via wind and solar as well as natural gas. The company operates the portfolio under long-term power purchase agreements with utilities and corporate buyers, providing steady income that fuels its dividend.
But in a world where interest rates are on the rise and high-dividend stocks offer a less risky alternative, Clearway and other similarly structured energy companies have fallen out of favor. On Monday, Evercore ISI analyst Michael Lonegan lowered his price target on Clearway to $27 from $34 in response to market sentiment.
The analyst kept an outperform rating on Clearway shares and called the stock "an attractive alternative" to other energy companies facing more difficult conditions. Evercore believes Clearway is set up well to sustain and grow its dividend.
NYSE: CWEN
Key Data Points
Now what
The Clearway stock drop is an example of investors focusing on the headline and not the underlying message. Shares of Clearway are down nearly 40% year to date, enough to cause Wall Street to reset expectations and, in this case, lower the price target. But that doesn't mean the company is in trouble and shouldn't be a reason to sell.
Clearway today offers a dividend yield north of 7%, and the company is well on its way toward delivering on the 5%-to-8% annual dividend growth expected through 2026. Yes, there is more competition for income-oriented investors today, and the stock has fallen out of favor somewhat as rates have risen, but this remains a solid company with the potential for substantial growth up ahead.
Long-term-focused investors would be wise to ignore the price target cut and focus on where Clearway goes from here.
