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It’s no secret that oil companies keep profits and cash flow flowing.
After all, when Big Oil reported its financial results for 2022, President Joe Biden called the industry’s record earnings “outrageous.”
And that means these big oil producers can return a lot of money to investors.
For example, Chevron Corp. announced a 6% quarterly dividend increase to $1.51 per share in January. At the current share price, the oil-producing giant offers an annual dividend yield of 3.8%.
At ExxonMobil Corp. last October, the board of directors increased the company’s quarterly payout to 91 cents per share. The stock is now yielding 3.4%.
To put that in perspective, the average dividend yield of S&P 500 companies is currently just 1.7%.
While Big Oil’s juicy dividends seem attractive in today’s market, not everyone is a fan.
For example, environmental, social and governance (ESG) investors may not want exposure to the sector because the extraction, production and use of oil can lead to carbon emissions, air pollution and climate change.
The good news? Hydrocarbon exploration and production is not the only business that can bring generous returns to income investors. Today, clean energy stocks can also pay outrageous dividends.
Here’s a look at two of them. Wall Street also sees positive sides to this duo.
Do not miss it:
Brookfield Renewable Partners L.P. (NYSE: BEP)
Brookfield Renewable Partners owns and operates a diverse portfolio of renewable energy assets across North America, South America, Europe and Asia. The partnership primarily invests in hydropower, wind, solar and utility-scale storage facilities.
As one of the largest publicly traded, pure-play renewable energy platforms in the world, Brookfield Renewable has an installed capacity of 25,700 megawatts and a development pipeline of approximately 126,000 megawatts of renewables.
The partnership is also distinguished by its cash return for investors. In 2001, it paid total benefits of 38 cents per unit. This year it is on track to pay $1.35 per unit. That translates to a compound annual growth rate (CAGR) of 6%.
At the current unit price, Brookfield Renewable offers an annual distribution yield of 4.2%.
The best part? Management aims to sustainably increase payout over time, with an annual distribution growth target of between 5% and 9% on average.
So far, Brookfield Renewable’s stock is already up more than 20%, and Wells Fargo Securities analyst Jonathan Reeder sees further upside potential on the horizon. The analyst has an Overweight rating on Brookfield Renewable and a price target of $36, about 12% above current levels.
Checking out: Best high yield investments
NextEra Energy Partners LP (NYSE: NEP)
NextEra Energy Partners was founded by energy company NextEra Energy Inc. (NYSE: NO) to own, manage and acquire clean energy projects that generate stable cash flows.
Today, NextEra Energy Partners’ portfolio has interests in wind, solar and energy storage projects in the US, along with natural gas infrastructure assets in Texas and Pennsylvania.
Because natural gas is not considered a renewable energy source, NextEra Energy Partners is not a purely renewable energy source. However, it recently announced plans to become one.
“To lead this transition, we are launching a process to sell our natural gas pipeline assets, and we are suspending distribution rights fees to NextEra Energy through 2026,” said John Ketchum, chairman and CEO of NextEra Energy Partners, in a press release.
As NextEra Energy Partners begins the transition to a 100% pure renewable energy investment opportunity, it still intends to be very income-friendly for investors.
The partnership currently pays quarterly distributions of 84.25 cents per share, giving the stock an attractive annual return of 5.4%. Management expects to grow distribution per unit at 12% to 15% per year through at least 2026, though they mentioned that given the current capital market environment, the growth rate is likely to be “at or near the lower end of this range.”
Oppenheimer & Co. Inc. analyst Noah Kaye has an Outperform rating on NextEra Energy Partners and a price target of $90, implying a potential upside of 46% from current levels.
It comes down to
Energy, whether from fossil fuels or renewable sources, supports the functioning of today’s society, making many energy stocks a powerful source of dividends. But the realm of high-yield investing extends far beyond the energy sector.
Other industries, such as those that provide basic human needs such as food and shelter, can also generate significant returns. For those looking to generate passive income without the volatility often associated with publicly traded stocks, there are opportunities to invest in these essential service companies through the private market.
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This article Not a fan of oil, but enjoy the high dividends of energy stocks? Here are 2 renewable energy plays that yield up to 5.4% originally appeared on Benzinga.com
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