Brookfield Renewable (BEPC 0.13%) (BEP 1.79%) and Clearway Energy (CWEN -4.26%) (CWEN.A -4.27%) are leaders in producing renewable power. Their large-scale renewable energy assets generate stable and growing cash flow, allowing both companies to pay attractive dividends. Brookfield currently yields almost 4% while Clearway's payout is around 5.5%.
The top renewable energy dividend stocks have recently teamed up in a strategic move aimed at enhancing their growth profiles. Let's dive into the details of this mutually beneficial deal and see how it supercharges their dividend growth strategies.
Image source: Getty Images.
Details on the deal
Deriva Energy, a portfolio company of Brookfield, agreed to sell a portfolio of 613 megawatts (MW) of solar energy assets to Clearway Energy. The portfolio covers eight states. The companies expect to close the transaction in the second quarter of next year.
Clearway will bring in a co-invest partner for 12 of the assets (227 MW) located in the Western U.S. Fengate Asset Management, an existing investment partner on an operational wind energy facility, will become its 50-50 joint venture partner on these assets.
How this deal benefits Brookfield
Brookfield Renewable routinely acquires large-scale renewable energy platforms that it operates as independent businesses. In 2023, it invested in the acquisition of Duke Energy's commercial renewable energy platform. At the time, the business had 5.9 gigawatts (GW) of operating and under-construction wind, utility-scale solar, and battery storage assets. Additionally, it had a 6.1 GW development pipeline. The deal provided it with incremental cash flow (it boosted its funds from operations (FFO) by 3% per share in 2024) and visible growth from the development pipeline and wind repowering projects.
The company has since started implementing its highly successful capital recycling strategy at Deriva to enhance its growth. Brookfield sells stabilized operating assets and reinvests the proceeds in higher-returning new investments, such as development projects and bolt-on acquisitions. Deriva CEO John Clapp stated that the sale of assets to Clearway "represents an important step in advancing our strategy to optimize our asset portfolio and recycle capital into our next phase of growth."
Deriva can use the capital to reinvest in growing its operations and cash flow. Increased income from these investments will support Brookfield's goal of delivering more than 10% FFO per share growth, which underpins its plans to raise its high-yielding dividend by 5% to 9% each year. This deal directly strengthens Brookfield's ability to sustain and increase its dividend.
How the deal benefits Clearway Energy
Clearway Energy is acquiring a portfolio of cash-flowing solar energy assets backed by long-term contracts (10-year average remaining term). The company plans to invest between $210 million and $230 million into the portfolio, which should generate an average of $27 million in annual cash available for distribution (CAFD) starting in 2027.
This investment adds a lot more clarity to the company's long-term growth profile. Clearway Energy now expects its CAFD to be at or above the top end of its $2.50-$2.70 per share target range in 2027. That's nearly 30% above the mid-point of its CAFD guidance range for 2025 at $2.08 per share.
That improved long-term growth outlook further supports Clearway's plans to grow its dividend. Clearway expects to increase its dividend to around $1.98 per share by 2027 (up from about $1.78 per share this year, a more than 11% increase). The additional cash flow from the acquired assets will help drive its dividend payout ratio toward the lower end of its target range of 70% to 80%, thereby allowing it to retain more income for future investments. This provides Clearway with a solid foundation to continue growing both its CAFD per share and dividend within or above its 5% to 8% annual target range beyond 2027.
A win-win deal
Brookfield's Deriva Energy is selling a portfolio of solar energy assets to Clearway Energy in a deal that benefits both companies' dividend strategies. For Brookfield, the transaction frees up capital to invest in new high-return projects, supporting future increases in its high-yielding dividend. For Clearway, the new assets drive stronger earnings growth, which enables the company to continue its dividend growth plans while maintaining a more sustainable payout ratio. This mutually beneficial deal makes both stocks even more appealing for income-focused investors.
