Over time, the world economy has been gradually shifting to renewable energy. Thanks to government incentives and declining prices, the pace has accelerated recently. Future growth in the need for renewable energy sources may be driven by the growing demand for electricity from technology businesses for cloud computing and artificial intelligence (AI) applications.
Leading producers of renewable energy, such as NextEra Energy (NYSE: NEE), Brookfield Renewable (NYSE: BEPC) (NYSE: BEP), and Clearway Energy (NYSE: CWEN) (NYSE: CWEN.A), stand to benefit greatly from these trends. Because of their potential for long-term total return, they are excellent energy stocks to purchase and keep.
A powerful wealth creator
Over the years, NextEra Energy has shown to be a wealth-generating machine. Over the past 15 years, the top U.S. utility has produced an annualized total return of 11.4%. That has surpassed both the S&P 500 (10.5%) and other utilities (6.8% annualized total return).
Its dividend and continually increasing earnings have been the main drivers of its performance. Over the past ten years, its dividend has grown at a compound annual rate of 10%, while its adjusted profits per share have expanded at a pace of 9%. NextEra has profited from its investments in renewable energy, accretive acquisitions, and Florida utility customers’ consistent growth in power demand.
Above-average growth should continue to be powered by those factors. Through at least 2027, NextEra anticipates growing its adjusted earnings per share at or near the top of its 6% to 8% annual target range. It anticipates increasing its dividend, which yields approximately 3%, by 10% year through 2026.
The future holds great promise for it in light of the growing demand for renewable energy sources. In comparison to the previous seven years, it projects a threefold increase in new renewable energy and storage capacity during the next seven years.
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High-powered growth potential
Over time, Brookfield Renewable has experienced rapid growth. Since 2016, the top global provider of renewable energy has had a 12% compound annual growth in its funds from operations (FFO) per share. In the meantime, throughout the previous 20 years, it has raised its dividend at a compound annual rate of 6%.
The business ought to keep producing strong profits and revenue growth. Through 2028, Brookfield Renewable anticipates that three natural drivers—inflation-indexed rate hikes, margin enhancement initiatives, and its extensive development pipeline—will propel 7% to 12% annual growth in FFO per share.
It anticipates that accretive acquisitions will propel its FFO growth rate into the double digits in the meantime. The business has reached an agreement to buy a European developer of renewable energy with a sizable pipeline of projects in different phases of development. With the support of these development drivers, Brookfield will be able to meet its goal of growing its dividend (which yields approximately 5%) by 5% to 9% annually.
Its expanding offering of sustainable solutions serves as another driving force behind this viewpoint. In the areas of nuclear services, solar panel manufacturing, recycling, carbon capture and storage, and biofuel generation, Brookfield has established platforms. Its potential for long-term growth is increased by these investments.
High-end dividend growth ahead
One of the biggest generators of renewable energy in the nation is Clearway Energy. Its portfolio also includes cleaner-burning natural gas power plants. These assets provide a significant amount of steady cash flow, which Clearway distributes as a high-yielding dividend (which is currently close to 6%).
Through 2026, the corporation plans to raise payouts in the range of its 5% to 8% yearly aim. Nearly all of that growth has already been secured and funded by it. A few years ago, Clearway sold its thermal assets, and it has since recycled the earnings into investments in renewable energy with greater yields. In order to meet its dividend growth goal, the corporation has committed to making enough new investments or has visibility into enough of them.
Clearway is becoming more confident that it will be able to raise its dividend after 2026. It has been maintaining low-end dividend growth in 2027 by renewing contracts at high enough rates on its natural gas power facilities. It also sees numerous chances to expand its current solar and wind projects with battery storage. Furthermore, it has a strategic alliance with a top developer of renewable energy, which ought to keep presenting it with fresh investment prospects.
Plugged into a powerful growth megatrend
In the ensuing decades, demand for renewable energy should continue to rise quickly. This should allow for healthy dividend and earnings increases for NextEra Energy, Brookfield Renewable, and Clearway Energy.
These top energy firms are positioned to provide investors with great total returns over the long run because to those growth drivers. Because of this, they are excellent stocks to purchase and hold for future growth.
Should you invest $1,000 in NextEra Energy right now?
Think about the following before purchasing NextEra Energy stock:
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