The past few years have seen significant investment in the energy sector. While the industry is still in the growth phase, now is the best time to take your pick and enjoy an early mover advantage with energy stocks.
This is a decade defined by climate consciousness, and countries across the world are taking the necessary steps to achieve their long-term goals. The U.S. has a target of 100% carbon-free electricity by 2035 and has committed to triple the nuclear capacity by 2050. We also saw a soaring demand for solar energy this year which benefitted dividend stocks, and while it has subsided now, we could see it pick up in the coming months. If you want to make the most of the urgency surrounding climate change but also want to enjoy passive income, here are the three energy stocks with dividends to consider.
NextEra (NEE)
NextEra Energy (NYSE:NEE) is a magnificent stock to add to your portfolio for several reasons. The company has had an excellent year and enjoyed EPS growth in the first three quarters. It is also on track to achieve projections for 2023 overall. The company has been recently suffering due to concerns about the high-interest environment and issues related to funding but these are issues of the company’s affiliate NextEra Energy Partners, which is a solely renewable energy company and wouldn’t impact the growth of NextEra Energy.
NextEra Energy is a blend of both, a regulated utility company and a renewable energy company. As the largest electric utility in the country, it continues to generate steady revenue and is also involved in renewable energy sources like solar and wind. The company aims to achieve earnings growth at the rate of 6% to 8% through 2026.
NextEra Energy has a solid history of rewarding shareholders with regular dividends and it pays an above average dividend of 47 cents quarterly for a 3.13% yield. NEE stock is trading at $59 today, and looking at the strong history and annual earnings growth rate, it looks like a good bet. It aims to achieve a 10% dividend growth through 2024 at least. Guggenheim analyst has a price target of $70 for the stock with a buy rating while Citigroup has initiated coverage on the stock with a buy.
Enterprise Products Partners (EDP)
You can take home significant passive income by investing in Enterprise Products Partners (NYSE:EPD). The company has a dividend yield of 7.6% and has been increasing the dividend payouts for the past 26 years consecutively. The North America-based company has an impressive portfolio of assets which helps maintain steady cash flow. It charges a fee from companies who use its assets and this helps it ensure steady revenue. The company has an extensive pipeline network and is not exposed to the volatility in oil and gas prices.
In its third quarter results, EDP saw an EPS of 61 cents, and revenue hit $12 billion. The revenue has dropped 22% year-over-year but it should not be alarming as the dip could be temporary. It can also be attributed to the high interest rates, and this decline could be factored in the stock price already. Exchanging hands for $26, EDP stock is very close to the 52-week high and is up 8% year to date. Since the company makes money when others use its assets, there is little risk of losing your money. It has long-term contracts and a strong cash flow position.
Enterprise Products has recently announced four new production projects in the Permian Basin which will help expand the natural gas liquid operations. Since the company’s liquidity position is strong, it can continue to invest in infrastructure and assets. It also has a low-debt balance sheet which works in its favor.
I strongly believe that the company is in a position to sustain the dividends in the coming years. Buy the stock before it soars and enjoy passive income for years to come.
Brookfield Renewable Partners (BEP)
One of the largest companies in the energy space is Brookfield Renewable Partners (NYSE:BEP). It manages several renewable energy sources including solar, wind and hydroelectric. With over $800 billion in assets under management, Brookfield is one of the strongest players in the industry today. BEP stock is exchanging hands for $25 today and has lost 2% of its value year to date. While it isn’t much, the stock still looks undervalued to me. If you look at the financials, there are many reasons to bet on the stock. It saw a 7% year-over-year rise in revenue to hit $1.18 billion.
The stock enjoys a dividend yield of 5.35% which is impressive. The company is profitable and this means it will not have to worry about borrowing for operations. It is also a sign that it will be able to continue rewarding shareholders for the coming quarters. Its diverse portfolio and impressive capacity make it worth an investment. It is a powerhouse of mergers and acquisitions, and the management aims a 12% to 15% return by increasing the assets. If it can achieve this double-digit return, it could see the stock move upwards.
BEP stock will not be this cheap forever. It could soar higher in 2024, and holding this stock for passive income can be a smart choice. A strong balance sheet, impressive projects, and a stable dividend make it a buy.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.