As July gets underway, the S&P 500 index sits near all-time highs. The yield on the index is below 1.3%, which isn't nearly enough to get a retired income investor's attention. But yields above 4%, now that's a different story. And if those yields are backed by reliable businesses and growing dividend payments, well, you might just find Brookfield Renewable(NYSE: BEP)(NYSE: BEPC) and WEC Energy(NYSE: WEC) in your portfolio before the month is over.
Brookfield Renewable is building the energy future
There are two ways to buy Brookfield Renewable. One is a partnership, with a yield of 5.6%, while the other is structured as a corporation, with a dividend yield of roughly 5%. They both represent the same entity, but the partnership requires investors to deal with a K-1 form come tax time. It's a bit more complicated and investors, including large entities like pension funds, prefer the corporate share class. That higher demand is the reason for the lower yield from the corporate share class. If you don't mind a little extra effort on April 15, you can pick a material increase in yield with the partnership units.
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Brookfield Renewable is overseen by Brookfield Asset Management(NYSE: BAM), a large Canadian asset manager with a long history of investing in infrastructure assets at a global scale. Brookfield Renewable gives you a chance to invest alongside Brookfield Asset Management as it puts money to work in the fast-expanding clean energy space. Brookfield Renewable's business is broken down between hydroelectric (47% of production), onshore wind (21%), solar (16%), distributed power (9%), and what amounts to "other" (the remainder). Its reach spans North America, South America, Europe, and Asia.
Hydroelectric is a solid foundation on top of which Brookfield Renewable is aggressively expanding its investment in solar, wind, and other clean energy technologies. At this point the target is for funds-from-operations growth of roughly 10% a year with annual distribution growth of between 5% and 9%. Over the past 20 years, distribution growth has averaged roughly 6% a year. Brookfield Renewable clearly knows how to hit its targets.
If you are trying to live off of your dividend in retirement, Brookfield Renewable should be on your shortlist in July. And it really doesn't matter if you pick the 5% dividend-yielding version or the 5.6% distribution-yielding option, both are likely to be very rewarding over time as the dividend continues to grow.
WEC Energy is set to benefit from the AI boom
Compared to Brookfield Renewable, WEC Energy is a rather boring regulated utility operation. It provides electricity and natural gas to roughly 4.7 million customers in parts of Wisconsin, Illinois, Michigan, and Minnesota. The dividend yield is currently around 4.4% and the dividend has been increased annually for 21 years. The average dividend increase over the past decade was an attractive 7%, which is the same figure it was over the past three- and five-year periods, too. Talk about reliability!
The big story with WEC Energy, however, is that it is embarking on its largest five-year capital investment plan ever, at roughly $23.7 billion. There's a lot in the mix. The first big theme is the shift from coal power to cleaner natural gas and renewables. The second one is meeting surging electricity demand, which management expects to increase at a rate of 4.5% to 5% a year. That's pretty robust demand growth for a regulated utility and suggests that government overseers will be more than willing to grant the company its requests for rate increases.
One of the notable drivers of demand is going to be data centers, with Microsoft(NASDAQ: MSFT) recently announcing a $3.3 billion investment in a facility in Wisconsin. That new spending adds to its already active development of over 300 acres of property it owns there. But that 300 acres is clearly just the start, because Microsoft's total land ownership in the state exceeds 1,300 acres. As that company's new spending announcement on data centers shows, there's plenty more investment to come. And that's just one of the major companies operating in the region.
If you are a bit more conservative, WEC Energy will probably be the kind of high-yield dividend growth stock you'll want to sock away for the long term. Also worth a mention, the company proudly explains that its dividend growth is within the top decile of the utility sector. And the expectation is that earnings growth of between 6.5% and 7% will keep the pace of dividend growth high for years to come. Hard to complain about that!
Yes, you can still find high-yield stocks with fast-growing dividends
Sure, the market rocketing to new highs makes finding attractive dividend growth stocks a little more difficult. But don't let that dissuade you from trying. As Brookfield Renewable and WEC Energy show, they are out there. You just have to take the time to find them. And now that you have, July might be the month when you add two new companies to your income portfolio.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield Asset Management, Brookfield Renewable, and Microsoft. The Motley Fool recommends Brookfield Renewable Partners and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
