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These 3 Renewable Energy Dividend Stocks Could Help You Earn Passive Income

Prakash Kolli - June 03, 2022

renewable energy dividend stocks

Investors following a dividend growth strategy, a high-yield strategy, or a combination often look to utilities. They are a consistent source of passive income because their regulated nature allows the companies to pay a growing dividend.

One often-overlooked industry is renewable energy dividend stocks. Investors desiring to invest in a growing industry may want to consider some stocks in this group.

In addition, they are usually surprised upon learning about the types of stocks qualifying as renewable energy dividend stocks. The group includes well-known utilities and other stocks. Below are three renewable energy dividend stocks for investors to consider.

renewable energy dividend stocks

What is Renewable Energy?

Renewable energy’s importance has been rising, and the amount of energy from renewable sources grew globally to about 11% in 2019. Renewable energy includes wind, hydroelectric, solar, biomass, and geothermal. The fastest-growing types are wind and solar.

In some countries, renewable energy represents a large percentage of total energy. For example, in Brazil, renewable sources are 40%+ of all sources, much of it hydroelectric. Even in more developed countries, the percentage has risen dramatically due to increased solar and wind installations in the past two decades.

For example, renewable sources in the US now generate about 20% of all electricity. A similar increasing proportion of renewable energy generation is seen in the UK and many European countries.

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3 Renewable Energy Dividend Stocks

NextEra Energy (NEE)

NextEra Energy (NEE) is number one on this renewable energy dividend stocks list. The utility is the successor of Florida Power & Light Company. NextEra acquired Gulf Power Company from Southern Company (SO) in 2019, creating the largest utility in Florida, now called FPL. NextEra’s second subsidiary is Energy Resources, a leader in electricity generated by wind or sun.

FPL’s residential base consists of more than 51% of the state’s population. The utility has about 33+ GW of generation in operation and serves an estimated 11+ million residents. In addition, the company planned to add approximately 23 to 30 GW of solar, wind, and storage renewables between 2021 – 2024.

Energy Resources has a footprint throughout the US with about 28 GW of generation in operation and 4 GW of battery storage. This number is broken down into 20 GW wind, 4 GW solar, 2 GW nuclear, and 2 GW natural gas/oil. In addition, the company is adding about another 14 GW in wind and solar.

In addition, the utility is a well-known dividend growth stock. It has raised the dividend for 28 consecutive years, making the stock a Dividend Aristocrat. However, NextEra’s popularity has lowered the dividend yield over the past decade. It now yields only 2.2%, below the 5-year average of 2.29%. The dividend is supported by a conservative payout ratio for the utility of around 60%.

The low payout ratio permits NextEra to raise the dividend at a double-digit rate annually. The trailing growth rate in the past 5-years is 12.10%, and in the past decade, it has been 10.84%.

NextEra is not undervalued, though. On the contrary, it trades at a forward price-to-earnings (P/E) ratio of ~27.5X, above the range in the past 5-years.


renewable energy dividend stocks


Brookfield Renewable Partners LP (BEP)

Brookfield Renewable Partners LP (BEP) is the following stock on this renewable energy dividend stocks list. This Canadian company is a global leader in renewable energy with operations in Canada, the US, Brazil, Columbia, India, China, and Europe.

The partnership is 60% owned by Brookfield Asset Management (BAM), the Canadian alternative asset manager and investment firm. BEP trades on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE).

BEP is the multi-national operator of renewable energy sources with ~21 GW total generating capacity with another 652 GW in development. Nearly 50% of assets are hydropower at 8,100 MW, wind is 5,400 MW, solar is 2,600 MW, and energy transition (other) is 4,900 MW. The generating assets are spread out worldwide, with 9,900 MW in North America, 5,900 MW in South America, 3,700 MW in Europe, and 1,500 MW in Asia. 

Brookfield technically pays distributions as a partnership and has done so since 1999. The firm used to pay a monthly distribution but now pays a quarterly distribution. The current quarterly dividend rate is $0.32 per share, giving a dividend yield of about 3.5%. However, stock price appreciation and a recent dividend cut have lowered the dividend yield below the 5-year average of 6.81%.

The compound annual growth rate (CAGR) has been about 16.3% in the past decade, but the recent cut has lowered the 5-year growth rate to (-3.1%) CAGR. In the near term, the partnership expects to grow distributions at about 5% to 9% per year.

BEP is trading at about 19 times funds from operations (FFO), above the 10-year average of roughly 17X. However, considering the higher valuation and recent dividend cut, investors may want to take a wait-and-see approach to BEP.

renewable energy dividend stocks

Clearway Energy (CWEN)

Another pure-play renewable energy dividend stock is Clearway Energy (CWEN). This US company is an independent power producer, selling electricity to businesses, universities, hospitals, and governments. Clearway was controlled by Global Infrastructure Partners (GIP), one of the world’s largest infrastructure fund managers with about $81 billion in assets under management (AUM).

Clearway owns approximately 7,700+ MW of generating assets divided into 5,200+ MW of wind and solar and ~2,500 MW of natural gas. The solar assets are in California, Arizona, Texas, New Mexico, Utah, and Hawaii. The wind assets are located throughout the US, while the natural gas plants are in California and Connecticut. The utility recently sold its Thermal business for $1.35 billion and paid down debt.

In addition, Clearway has 22,300+ MW of projects in the development pipeline categorized into wind, solar, and storage. Nearly 6.7 GW are in late-stage development and should come online from 2022 to 2026.

Clearway has paid a dividend since 2015, and the current quarterly rate is $0.3536 per share. The utility often increases the dividend each month. However, the dividend was reduced in 2019 during the COVID-19 pandemic because of low cash available for distribution (CAFD) growth.

The forward dividend yield is now 3.84%, below the 5-year average of 5.13%. However, the growth rate has been about 7% in the past 5-years, even after accounting for the dividend cut. Clearway targets a payout ratio of 80% to 85% of CAFD.

The company trades at a high earnings multiple of about 46X. Furthermore, TotalEnergies (TTE) just acquired a 50% stake in Clearway from GIP for $1.6 billion in cash and a ~50% stake in a TotalEnergies’ subsidiary holding 51% of SunPower (SPWR). The deal reportedly values Clearway at $35.10 per share, and the stock is trading above that price point. Hence, investors may want to wait on Clearway.


renewable energy dividend stocks


Renewable Energy Dividend Stocks: Final Words

Renewable energy stocks can be a worthwhile investment, especially when it comes to earning dividends. These three renewable energy dividend stocks could help you to earn passive income via their paid dividends. 


Disclosure: None

Author Bio: Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor and blogger on dividend growth stocks and financial independence. Some of his writings can be found on Seeking Alpha, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, FXMag, and leading financial blogs. He also works as a part-time freelance equity analyst with a leading newsletter on dividend stocks. He was recently in the top 100 and 1.0% (81st out of over 9,459) of financial bloggers as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.