2021 has been a great year for the market, but when looking at stocks in the market today, it’s hard not to feel like values ââare stretched. Fortunately, there are still relatively stable companies with long-term cash flow and stable dividends available to patient investors.
Three Motley Fool contributors have chosen their top low-stress renewable energy stocks for 2022, and they are Clearway Energy (NYSE: CWEN), Brookfield Renewable Power (NYSE: BEPC), and NextEra Energy (NYSE: NEP). They all come with great dividends to go along with solid trading.
The original yield
Travis Hoium (Clearway Energy): Financing renewable energy projects is one of the most difficult parts of the supply chain as it takes hundreds of millions and sometimes billions of dollars, depending on the project. This is why yieldco, a company that purchases renewable energy projects and pays dividends with the proceeds, was formed. Clearway Energy, which originally started as NRG Energy, is one of the leaders in this field with a long history of operation.
Clearway currently has 1.3 gigawatts (GW) of solar projects, 3.5 GW of wind assets, 320 megawatts of community solar assets and an additional 5 GW of projects that it operates or manages. These assets generate cash flow that drives a 4.2% dividend yield for investors.
You can see above that the cash flow from operations is increasing, and it should continue. Clearway just sold its thermal power business to KKR for net proceeds of $ 1.3 billion and is investing heavily in energy storage projects linked to renewable power generation assets, like solar farms. Energy storage is a growth industry for renewable energy and this will help to maintain the growth of the business in the long term.
Let the experts take care of it
Howard Smith (Brookfield Renewable): Some investors who want to own renewable energy stocks don’t want the high valuations and volatility that come with many names of EVs or alternative energy start-ups. Brookfield Renewable is a place where you can let experts allocate your capital efficiently. And the stock fell 37% in 2021, giving investors a good opportunity.
This drop in the share price has resulted in a dividend yield that pays investors more than 3.3% per year. This income stream also helps alleviate any stress associated with stock price movements.
Brookfield Renewable invests in wind, solar and hydroelectric generating assets as well as energy storage facilities. Decarbonization is a global trend and Brookfield has assets in North America, South America, Europe and Asia, also offering geographic diversity. As this trend grows, more companies will look to enter into power purchase agreements to contract renewable energy sources to power their operations. Holders of these assets like Brookfield Renewable will benefit.
The company’s recent financial results show that the trend is already underway. Brookfield Renewable last month announced record third quarter operating funds of $ 210 million. This represents a jump of 32% compared to the period of the previous year. CEO Connor Teskey summed it up in this statement: âAs the decarbonization of the global economy continues to come to the fore, we are well positioned to seize the growing opportunity while delivering strong returns for our investors. Investors can relax by letting this management group do the hard work.
NextEra continues to shine in a tough market
Daniel Foelber (NextEra Energy): Investing in growth has a reputation for being a high risk, high reward business that could lead to sleepless nights. Still, there is a way to invest in the energy transition without stressing out. One solution is to use a catch-all infrastructure like Brookfield Renewable. I agree with Howard that this is a balanced company worth owning for the long term. A company with a similar investment thesis is NextEra Energy.
Like Brookfield Renewable, it pays a stable and growing dividend. And also like Brookfield Renewable, it is in growth mode. NextEra’s competitive advantage is timing, in that it has started rapidly increasing its solar and wind capacity faster than its peers. This head start has helped NextEra and its subsidiaries take an industry leading position as a diverse public service. Between 2017 and 2020, NextEra Energy increased its total net generating capacity by approximately 20%, but solar and wind net generating capacity increased by 40% during this four-year period.
The market has responded favorably to NextEra Energy’s ambitious growth plans.
Its action currently hovers around an all-time high and has crushed the S&P 500 and the utilities sector over the past five years, while increasing its dividend at a faster rate than the sector. NextEra doesn’t come cheap, but it’s the undisputed king of investing in large-scale renewable energy projects. In that sense, its premium valuation and dividend yield of 1.7% are worth the price.
Three dividend-paying stocks to buy today
All three of these stocks are paying a healthy and growing dividend, and as renewable energy production increases, they are also expected to grow. And with long-term contracts to sell renewable electricity to utilities and users, these stocks will also help you sleep at night in a volatile market.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.