Income from the Future of Energy

Kelly Green
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October 9, 2024
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Comments

As a dividend investor, I’m constantly looking for stocks we can hold for years or even decades to come. The “set it and forget it” nature has always been one of my favorite “features” of dividend investing.

I want to be out doing the things that bring me joy while my dividends keep hitting my account quarter after quarter like clockwork. But for such a long-term strategy to work, we have to find companies that sell things essential to everyday life. This is why our longest-term holdings tend to be consumer staples, utilities, or other energy stocks.

By now, you know that two of my favorite long-term holdings are pipeline giant Enterprise Products Partners (EPD) and plastics recycling leader LyondellBasell (LYB). Oil, gas, and plastics are all integral to our future.

I’ve gotten a lot of inquiries recently about energy stocks—specifically, companies helping to build the future of energy. Over the past two decades, solar and wind have gone from a tiny source of energy to over 13% of total supply worldwide. Some experts predict that most of our energy demand could be supplied from clean sources by 2035.

So, let’s take a quick look at two companies that some of my loyal readers have asked me to check out.

Energy Dividend Candidate #1: Brookfield Renewable Partners L.P. (BEP)

Brookfield is one of the largest publicly traded platforms for renewable power and decarbonization solutions. The company has hydroelectric, wind, solar, and distributed energy assets across five continents.

Source: Brookfield

And its global network just continues to expand.

In the second quarter, the company agreed to acquire 53% of the outstanding shares of publicly listed Neoen, a leading independent producer of renewable energy in France, Australia, and the Nordics. These three core markets are some of the fastest growing for renewables.

BEP also made its first investment in South Korea. This is an important market as it’s home to many power-intensive corporations with lofty decarbonization goals.

Here in the US, BEP is building a 220-megawatt battery storage facility in Texas with commissioning expected by the second half of 2025. With all current developments and the Neoen acquisition, BEP will be one of the largest battery developers globally with 2,300 megawatts (operational and under construction).

Looking at the numbers, BEP saw second-quarter funds from operations (FFO) of $339 million, up from $312 million for the same quarter last year. That breaks down to $0.51 per unit (as a partnership, these are units and not shares). It had a $154 million net loss for the quarter, up from last year’s loss of $39 million.

Ideally, we don’t want to see losses, but keep in mind the company is in a growth phase. During that phase, it’s not uncommon to see more money going out than coming in.

I like the company’s global strategy, and think it is positioning itself as an industry leader for a long time.

The quarterly distribution is $0.355 per unit. At its current price of around $26.59, that’s a yield of 5.3%.

Energy Dividend Candidate #2: Clearway Energy Inc. (CWEN)

Clearway Energy is a leading clean power producer and developer with a focus on the US. It is currently developing or operating in 32 states with gross operating capacity of 11.4 gigawatts.

Source: Clearway Energy

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For the second quarter, CWEN had net income of $4 million, down from $84 million for the same quarter last year. Adjusted EBITDA came in at $353 million, up from last year’s $316 million The drop in net income was primarily due to the impact of economic hedges. But I would still want to see this trend reverse in the third quarter.

CWEN has paid a dividend for the past 8 years, and raised it for the past 4 years. It currently pays a quarterly dividend of $0.4171. At a current share price of around $28.84, that’s a yield of 5.7%.

Neither are official recommendations, but both should be on your radar if you’re looking for exposure to the growing renewable energy market and want to collect dividends while you wait. One is a leader in the US and the other a leader globally, giving you two different options for your portfolio.

For more income now, and in the future,

Kelly Green

P.S. Don’t forget that I’ll be speaking at the Orlando MoneyShow October 18 and October 19. You will need a paid pass to attend my Friday presentation. However, I’ll be speaking Saturday in the exhibit hall which is free. If you’re going to be in the area, I would love to meet you in person.