The renewable energy industry is increasingly replacing fossil fuels with new forms of electricity and fuel production. Wind and solar power beats coal and natural gas on the basis of the cost of electricity produced, and energy storage and hydrogen are also increasingly competitive. This opens up an excellent investment environment for companies looking to generate a return from renewable energy projects.

When we look at the set of renewable energy dividend stocks, three companies are industry leaders that we believe could be dividend giants for decades to come. Brookfield Renewable Energy Partners (NYSE: BEP), Atlantica sustainable infrastructure (NASDAQ: AY), and NextEra Energy (NYSE: NEE) are these companies and that is why they are today our best stocks of high efficiency renewable energy.

As stable as it gets

Travis Hoium (Brookfield Renewable Energy Partners): The best long-term activity in renewable energy has turned out to be asset ownership. Renewable energy projects typically come with 10 to 25 year contracts to sell electricity to utilities, businesses, or homeowners. This allows owners to fund them with debt and equity, and in this case, in the form of dividend-paying stocks.

Brookfield Renewable Partners is one of the industry’s largest owners of renewable energy assets with 21,000 megawatts of projects worldwide. The company aims to generate annualized returns of 12% to 15% through organic distribution growth of 5% to 9% and some appreciation in the share price.

Based on recent dividends paid, the stock is earning 3.2% and is expected to grow over time. You can see below that the dividend will not increase in a straight line, but tend to increase. Over the past year and a half, dividends paid have declined in part due to a split in BEP and BEPC shares and a 3 for 2 share split. Without these events, dividends per share would be steadily higher. , continuing a ten-year trend.

BEP data by YCharts

As constant as the dividend growth of a company like Brookfield Renewable Partners is, there are also risks for renewable energy projects that should not be overlooked. At present, hydropower assets are below expectations due to drought conditions around the world, especially in Brazil. If climate change results in less snowfall and ultimately less river flow, hydropower assets might feel it first and that’s a big part of Brookfield Renewable Partners’ business. On the flip side, less rain and more sun could mean solar projects are exceeding long-term expectations, so being a diverse and important asset owner helps.

I think the stability and know-how of Brookfield Renewable Partners make them a great long-term dividend-paying stock. And with new opportunities emerging in energy storage and hydrogen, it could grow organically for more than a decade, making today a 3.2% dividend yield well below that at what we should expect in the years to come.

A diverse set of assets

Howard Smith (Atlantic Sustainable Infrastructure): More and more companies in a wide range of industries are signing power purchase agreements with renewable energy producers to power their facilities and ensure that products can be produced and sold in a sustainable manner. Companies like Atlantica Sustainable Infrastructure that own or invest in this power generation are benefiting and growing from this movement. And these benefits are shared with investors in the form of a high yield dividend.

Atlantica can feel confident in promising to share the cash flow because 100% of its assets are contracted or regulated. While it retains cash for growth opportunities, it aims to pay shareholders 80% of the cash generated. And he has consistently increased those dividend payments in the past. Its quarterly dividend has increased 65% over the past four years. This growth is expected to continue, with cash available for distribution increasing by 12.9% in the first half of 2021.

Atlantica’s activities are spread across North America, South America and the Europe, Middle East and Africa region. The company has installed renewable energy generation capacity, natural gas efficient generation capacity, power transmission lines and water desalination plants. Almost 75% of Atlantica’s revenue came from its renewable energy business in 2020.

And 2021 is off to a strong start. The company’s continued investments in renewable energy assets resulted in a 30% growth in its operating megawatts in the first half of 2021 compared to the first half of 2020.

The stock looks cheap from a price versus free cash flow perspective, compared to its peers with similar strategies.

AY Dividend Yield Data by YCharts

With a dividend of over 4.3%, the time seems to have come to buy Atlantica as support for the growth of the renewable energy sector continues to expand.

A core business, long-term growth potential and an additional dividend

Daniel Foelber (NextEra Energy): The stock market is near an all-time high, but the average dividend yield in the S&P 500 is near a 10-year low. This can make it difficult to find high-quality dividend-paying stocks, especially in the renewable energy arena where many stocks do not pay dividends. Large utilities like NextEra Energy are a great way to invest in renewable energy growth while earning income.

NextEra Energy has just had an impressive quarter. Its portfolio consists of natural gas, solar power, wind power and other assets, giving it various sources of income that allow it to withstand the ups and downs of the energy market.

Its established presence as Florida’s primary utility – through Florida Power & Light and Gulf Power – provides the bulk of its revenue and bottom line. A solid base from this profitable business combined with access to low-cost debt has enabled NextEra to increase its investments in renewable energies, primarily through its NextEra Energy Resources division. Today, the company is the largest producer of wind and solar power in the United States. But it’s not just about capacity.

NextEra’s lead in the energy transition gives it a head start over other public services since it has had time to forge relationships, complete its supply chain, refine its logistics and tackle a variety of projects in different markets. This experience may not show up on the financial statements, but it has intangible value that plays into the larger investment thesis of the stock.

NextEra’s long-term game plan is to generate predictable income (mostly from renewables) through long-term contracts and distribute a portion of the profits to investors through a dividend. In this way, NextEra Energy is a classic example of a balanced renewable energy stock that can complement any portfolio. Earlier this year, the company increased its quarterly dividend to $ 0.385 per share, which represents an annual return of 1.9% at the time of writing.

Built to last

The theme of all of these companies is that they are large owners of diversified renewable energy assets with long-term contracts to sell electricity to utilities or other end customers and which fuel their dividends. As long as the renewable energy industry continues to grow and there are assets to buy at attractive yields, these are great dividend stocks to buy and hold while you are simply collecting a dividend.