The Hidden Gem Energy Stock That Could Own the Next 10 Years
Key Points
Clearway Energy is in a strong position to capitalize on growing clean power demand.
It has excellent growth visibility through 2030.
Clearway has plenty of power to continue growing at a healthy rate in 2031 and beyond.
- 10 stocks we like better than Clearway Energy ›
Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A) is one of the largest owners of clean generation assets in the country with 12.7 gigawatts (GW) of wind, solar, energy storage, and natural gas capacity. Despite that, it tends to fly under the radar of most investors.
It might not remain hidden for much longer. Clearway is in a strong position to capitalize on growing demand for clean power, driven by catalysts such as AI data centers. Here's why this top renewable energy dividend stock could own the next decade.
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Powerful total return potential
Clearway Energy owns a large portfolio of clean generation assets secured by long-term power purchase agreements (PPAs), which provide it with stable, predictable cash flow. The company pays out a portion of that steady cash flow in dividends (its target dividend payout ratio is below 70%). That enables it to provide investors with an attractive income stream (a 5% current dividend yield) while retaining a meaningful portion of its cash flow to reinvest in additional income-generating clean power assets.
The company invests in organic expansion initiatives, such as wind repowering projects and battery storage capacity. It also acquires operating clean power assets from its parent company (renewable energy developer Clearway Energy Group) and third parties. Those deals enable sellers to recycle capital into new renewable energy development projects.
Clearway Energy has significant near-term growth visibility, driven by a long list of secured investment opportunities. They power Clearway's view that it can grow its cash flow per share at a 7% to 8% compound annual rate through 2030. Meanwhile, it has the financial flexibility and opportunity set thanks to its strategic relationship with its parent to grow its cash flow per share at a 5% to 8%+ annual rate in 2031 and beyond. That should support continued dividend increases.
With a 5% dividend yield and its earnings growing by more than 5% annually, Clearway could easily generate total annualized returns above 10% over the next decade. That's a strong return potential from a lower-risk investment.
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Matt DiLallo has positions in Clearway Energy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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