Dividend-paying utility stocks were once considered the cornerstone of a conservative investor’s income portfolio. The market is much larger today than when utilities were called “widow and orphan” stocks, but more dividend stock options don’t really change the opportunity to add boring utilities to your portfolio. dividend stocks. As June begins, you may want to take a look at NextEra Energy (NYSE: NO), Brookfield Renewable Energy (NYSE:BEPC)(NYSE:BEP)and, for those with a contrarian bent, Dominion Energy (NYSE:D). Here’s why.
1. NextEra Energy is a dividend growth machine
NextEra Energy has increased its dividend by about 10% per year, on an annualized basis, over the past decade. That’s a good number for any business, not to mention a boring utility. To put this number into perspective, a dividend growth rate in the mid-single digit range would normally be considered strong for a utility. But here’s the thing: NextEra also projects 10% dividend growth through at least 2026. If you are a dividend growth investor or a growth and income investor, you will love NextEra Energy.
NextEra Energy achieves dividend growth through a unique approach. The core of the activity is a large operation of a regulated public service, comprised largely of Florida Power & Light. This division offers slow and steady growth. In addition to regulated utility operations, NextEra is backed by one of the largest solar and wind companies on the planet, where the company’s overall growth comes from.
By around 2026, NextEra plans to build up to 41.8 gigawatts of renewable energy, which is a huge sum and suggests there is strong growth ahead for the company as a whole. Although the stock’s yield is modest at 2.6%, the dividend growth is the real draw here.
Brookfield Renewable focuses on clean energy
That said, some investors might look at the utilities sector and think that clean energy is the real future, which is why NextEra is investing so heavily in the space. If you want to ditch the old technology and focus solely on the new, Brookfield Renewable is a great option, either as a limited partnership or through the corporate share class. Both offer a growing income stream and attractive returns.
The partnership category has a dividend yield of around 5% today, while the corporate category has a dividend yield of around 4.5%. (Demand from institutional investors who may not be allowed to hold partnerships is likely the cause of the yield difference, since the two categories pay identical distributions.)
Brookfield Renewable has a globally diversified portfolio of clean energy assets, including hydro, solar, wind and storage. However, it is important to understand that Brookfield Renewable is managed by Brookfield Asset Management (NYSE:BAM). It’s a way for small investors to invest alongside a giant asset manager with a long history in the infrastructure sector.
This changes the story a bit, because Brookfield Renewable is not focused on…
