Renewable energy is a once-in-a-generation investment megatrend. The world needs to invest trillions of dollars in developing additional renewable energy capacity in the coming decades.
As a result, companies that invest in renewable energy should generate steady growth for decades to come. Brookfield Renewables(NYSE: BEPC)(NYSE: BEP), Clearway Energy(NYSE: CWEN)(NYSE: CWENA)and NextEra Energy(NYSE: NEE) They are leaders in investment in renewable energy. That makes them the best stocks to buy and hold to capitalize on the decades-long renewable energy megatrend.
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Brookfield Renewable is a global leader in renewable energy. It operates a diverse portfolio of hydroelectric, wind, solar and battery storage assets around the world. Brookfield sells the clean energy it produces through long-term fixed-rate power purchase agreements (PPAs) with utilities and large corporations with an average remaining term of 13 years. Most of their PPAs link rates to inflation (70% of their income). As a result, it generates very stable and constantly increasing cash flow.
The company’s existing inflation-linked PPAs alone should deliver low-single-digit annual funds from operations (FFO) per share growth over the next decade. Meanwhile, with energy demand increasing due to AI data centers and other catalysts, Brookfield can secure PPAs at even higher rates as legacy agreements expire. For example, it recently signed two 20-year hydroelectric agreements with Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google, which represents more than $3 billion in future revenue. The company expects margin-enhancing activities like that to add an additional 2% to 4% to its FFO per share each year.
Brookfield is also investing heavily to expand its renewable energy capacity. It has a broad development pipeline and routinely makes value-enhancing acquisitions. The company estimates that its multiple growth drivers will support FFO per share growth of more than 10% annually in the coming years, more than enough to fund its plan to increase its dividend by 5% to 9% each year. With a yield close to 4%, Brookfield is one of the best renewable energy dividend stocks to buy.
Clearway Energy is one of the largest producers of clean energy in the country. It owns a large portfolio of wind and solar assets along with some critical natural gas generation capacity. Clearway also sells the power it produces through long-term fixed-rate PPAs with utilities and large corporations.
The clean energy company had committed $1 billion for growth investments starting this year, including projects to repower legacy wind farms and acquire newly developed assets upon entering commercial service, several of which support Google’s growing energy needs. These secured investments fully support its growth through early 2028. Meanwhile, its parent company, Clearway Energy Group (CEG), has a large pipeline of renewable energy development projects underway that it plans to offer its subsidiary in the future to support its growth. Clearway currently expects to grow its cash flow per share at an annual rate of 7% to 8% through 2030.
Clearway Energy has extensive growth potential beyond 2030. CEG expects to continue securing new development projects that it can transfer to its subsidiary upon entering commercial service. Additionally, Clearway expects to benefit from rising energy prices, organic expansion initiatives (battery storage and repowering investments), and third-party acquisitions. These catalysts should drive annual cash flow per share growth of between 5% and 8%+ after 2030. This should allow Clearway to continue increasing its 4.7% performance dividend.
NextEra Energy is a leading electric services company and developer of clean energy infrastructure. Generates very predictable profits from government-regulated rate structures and long-term fixed rate contracts.
The company expects to invest heavily in creating additional renewable energy capacity in the coming years. Your electric company in Florida (FPL) plans to obtain 35% of its energy from solar energy by 2034, up from 9% in 2024, as it continues to expand its industry-leading solar portfolio. NextEra Energy is also building significant renewable energy capacity for third-party customers, including Google. Additionally, it is developing data center campuses with associated energy in partnership with Google and others.
NextEra Energy expects to grow its adjusted earnings per share by more than 8% annually through 2035. That should allow the company to continue growing its dividend, which yields 2.7%, at healthy rates (6% annual growth is expected in both 2027 and 2028).
Brookfield Renewable, Clearway Energy and NextEra Energy have growing, large-scale renewable energy platforms. They expect to grow their earnings at healthy rates in the coming years, which should allow them to continue increasing their dividends. That combination of income and growth could allow them to produce powerful total returns for decades to come, making them the best renewable energy stocks to buy and hold for the long term.
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Matt DiLallo holds positions at Alphabet, Brookfield Renewable, Brookfield Renewable Partners, Clearway Energy and NextEra Energy. The Motley Fool positions and recommends Alphabet and NextEra Energy. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
The 3 Best Renewable Energy Stocks to Buy and Hold for Decades was originally published by The Motley Fool
