It’s no secret that oil companies have skyrocketed their profits and cash flow.
After all, when Big Oil released its 2022 financial results, President Joe Biden called the industry’s record profits “outrageous.”
And that means these big oil producers can make a lot of money for investors.
For example, Chevron Corp. announced a 6% increase in its quarterly dividend to $1.51 per share in January. At the current share price, the oil giant is offering an annual dividend yield of 3.8%.
At ExxonMobil Corp., the board increased the company’s quarterly payout to 91 cents per share last October. The title now yields 3.4%.
To put that into perspective, the average dividend yield for S&P 500 companies is currently just 1.7%.
While Big Oil’s hefty dividends look 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 are not the only activities capable of generating generous returns for income investors. These days, clean energy stocks can also pay outsized dividends.
Here is an overview of two of them. Wall Street also sees advantages in this duo.
Don’t miss:
Brookfield Renewable Partners LP (NYSE:BEP)
Brookfield Renewable Partners owns and operates a diversified portfolio of renewable energy assets in North America, South America, Europe and Asia. The partnership primarily invests in hydroelectric, wind, large-scale solar and 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 renewable energy assets.
The partnership also stands out for its cash returns to investors. In 2001, it paid total distributions of 38 cents per unit. This year, it’s on track to pay $1.35 per unit. This 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 payout growth target averaging between 5% and 9%.
Year-to-date, shares of Brookfield Renewable have already jumped more than 20%, and Wells Fargo Securities analyst Jonathan Reeder sees another upside on the horizon. The analyst has an overweight rating on Brookfield Renewable and a price target of $36, about 12% above current levels.
Check: Top High Yield Investments
NextEra Energy Partners LP (NYSE:NEP)
NextEra Energy Partners was formed by energy company NextEra Energy Inc. (NYSE:NEE) to own, manage and acquire clean energy projects that generate steady cash flow.
Today, NextEra Energy Partners’ portfolio holds interests in wind, solar and energy storage projects in the United States, as well as natural gas infrastructure assets in Texas and Pennsylvania.
Because natural gas is not considered a renewable energy source, NextEra Energy Partners is not pure-play renewable energy. However, he recently announced his intention to become one.
“To lead this transition, we are initiating a process to sell our natural gas pipeline assets and are suspending the incentive distribution rights fee to NextEra Energy through 2026,” said John Ketchum, President and CEO of NextEra Energy Partners, in a press release. .
As NextEra Energy Partners begins its transition to a 100% pure-play renewable energy investment opportunity, it still plans to be very investor-friendly.
The partnership currently pays quarterly distributions of 84.25 cents per share, giving the stock an attractive annual yield of 5.4%. Management expects to grow the payout per unit by 12% to 15% per year until at least 2026, although it mentioned that given the current capital market environment, the rate of growth 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.
The essential
Energy, whether derived from fossil fuels or renewable sources, underpins the functioning of contemporary 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 meet basic human needs like food and shelter, can also provide considerable returns. For those looking to generate passive income without the volatility often associated with publicly traded stocks, there are ways to invest in these essential service businesses through the private market.
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