Many people go green because it's good for the environment. While I'm all for a cleaner environment, I invest money in the hopes of making money. Going green has been very good for my portfolio and passive income stream.
I've steadily invested in renewable energy dividend stocks over the past several years. I recently reached the $20,000 milestone of capital invested in the sector. This growing investment is starting to pay big dividends. I'm currently generating over $1,300 in annual dividend income from this investment, enough to offset my annual utility costs. Here's a look at my renewable energy income portfolio.
An income-generating portfolio
I own shares of four renewable energy yieldcos, entities formed by other energy companies to own income-producing renewable energy assets. They distribute a significant portion of the cash flow from generating and selling renewable energy to shareholders via high yielding dividends (hence their name). Here's a snapshot of my mini portfolio of renewable energy yieldcos:
Renewable-Energy Stock | Total Investment | Yield on Cost | Annual Dividend Income |
|---|---|---|---|
NextEra Energy Partners(NYSE: NEP) | $4,000.00 | 5.2% | $206.00 |
Brookfield Renewable(NYSE: BEP)(NYSE: BEPC) | $7,500.00 | 8.6% | $641.25 |
Clearway Energy(NYSE: CWEN)(NYSE: CWEN.A) | $4,400.00 | 5.3% | $231.00 |
Atlantica Sustainable Infrastructure(NASDAQ: AY) | $4,250.00 | 6.3% | $267.33 |
Total | $20,150.00 | 6.7% | $1,345.58 |
Data source: author.
My largest position is in Brookfield Renewable, which I've owned a lot longer than the other three companies. I'm earning a very attractive yield on that investment because of a low overall purchase price for the shares and a steadily rising dividend payment.
I plan to continue adding to my renewable energy income portfolio in the future. I expect these stocks to continue paying and growing their dividends.
Sustainable income streams
Brookfield Renewable is an affiliate of Brookfield Corporation, which formed it to operate its renewable energy assets. Brookfield Renewable has grown into one of the world's largest publicly traded renewable power and decarbonization solutions platforms. It operates a vast hydro, wind, solar, and storage portfolio. It sells the power produced to electric utilities and corporate buyers under long-term power purchase agreements (PPAs), providing it with predictable cash flow.
The company benefits from a quartet of growth drivers:
Image source: Brookfield Renewable.
Those power sources should give Brookfield Renewable the fuel to increase its dividend by 5% to 9% per year.
NextEra Energy Partners is an affiliate of leading U.S. utility NextEra Energy(NYSE: NEE). The company formed this entity to acquire and operate renewable energy assets secured by PPAs. NextEra Energy currently has an extensive portfolio of operating renewable energy assets and those under development that it can drop down to its affiliate. The company estimates that future deals will give NextEra Energy Partners the power to grow its dividend at a 12% to 15% annual rate through at least 2026.
Clearway Energy is an affiliate of leading renewable energy development company Clearway Energy Group (CEG), co-owned by TotalEnergies and Global Infrastructure Partners. This strategic relationship provides Clearway Energy with lots of visibility into its future growth. The company currently expects to grow its dividend near the upper end of its 5% to 8% target range through at least 2026. It has already identified the investments needed to deliver that growth, mainly through transactions with CEG. It has also pre-funded those investments by selling its thermal assets last year, giving it $1.35 billion in cash to redeploy into higher-returning new investments.
Atlantica Sustainable Infrastructure counts Canadian utility Algonquin Power & Utilities as its cornerstone investor. That strategic relationship has supplied it with new investment opportunities in the past. The company has several other sources of growth, including development projects, asset expansions, and acquisitions from third-party sellers. The company currently has an extensive pipeline of renewable energy projects under development that should power its growth in the coming years. While Atlantica hasn't set a dividend growth target, it has steadily increased its payout over the last several years.
A powerful and growing income stream
Renewable energy yieldcos generate lots of stable cash flow backed by PPAs. That gives them the money to pay high-yielding dividends and invest in acquiring and developing additional income-producing renewable energy assets. Those investments will help grow their cash flows, enabling them to increase their dividends.
I love collecting those sustainable and growing dividends. That's why I plan to continue growing my renewable energy income portfolio in the coming years.
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Matthew DiLallo has positions in Atlantica Sustainable Infrastructure Plc, Brookfield Corporation, Brookfield Renewable, Brookfield Renewable Partners, Clearway Energy, NextEra Energy, and NextEra Energy Partners. The Motley Fool has positions in and recommends Brookfield Corporation, Brookfield Renewable, and NextEra Energy. The Motley Fool recommends Brookfield and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
