Tesla’s (NASDAQ:TSLA) Elon Musk recently made headlines after saying the electric vehicle maker would no longer accept Bitcoin (CRYPTO:BTC) as a payment due to “rapidly increasing use of fossil fuels for bitcoin mining and transactions.” According to the Cambridge Bitcoin Electricity Consumption Index, the cryptocurrency uses more energy than entire countries, including Sweden and Malaysia.
However, while fossil fuels are the global economy’s primary power source right now, we’re rapidly pivoting toward cleaner alternatives. Several companies are helping drive the energy transition. Three that stand out to our energy contributors as leaders are Brookfield Renewable (NYSE:BEP)(NYSE:BEPC), Clearway Energy (NYSE:CWEN)(NYSE:CWEN.A), and NextEra Energy (NYSE:NEE). Here’s why they make ideal investments for those concerned about Bitcoin’s energy usage.
The two-in-one energy stock
Reuben Gregg Brewer (NextEra Energy): NextEra Energy is one of the largest utilities in the United States. It has a dominant position in Florida thanks to its Florida Power & Light business and other assets in the Sunshine State. This government-regulated business provides the foundation for the company and its incredible 27 consecutive annual dividend increases (at a hefty 10% annualized clip over the past decade).
However, the really exciting part of NextEra Energy is its NextEra Energy Resources division. Don’t let the boring name fool you, this business is one of the largest owners of wind and solar power in the world. And NextEra has a backlog of 16 gigawatts of solar, wind, and battery storage projects in the works to augment its existing capacity of 26 gigawatts. But even that undersells the pipeline here, since management’s high-end target is to add 30 gigawatts of renewable power development by the end of 2024.
In fairness, NextEra’s success on the utility and renewable power side of its business is well known on Wall Street. The 2.1% dividend yield is near the low end of its historical range, suggesting the stock is expensive today. But that’s not unusual in the clean energy space and, unlike some names in the sector, NextEra has a giant and well-positioned utility as a backstop and financial support. Despite the elevated price, it’s a solid option for dividend-growth-minded investors looking at the clean energy space.
Solid growth potential ahead
Neha Chamaria (Brookfield Renewable): Brookfield Renewable shares may have dropped by double digits in the past month, but that’s exactly the kind of opportunity you’d want to check out a clean energy stock that’s growing bigger by the day.
Brookfield Renewable is one of the largest renewable energy companies in the world. The interesting thing about this company is its foothold in hydropower — a widely used source of renewable energy that few companies specialize in. Yet with the cost of other sources of renewable energy falling and demand picking up, Brookfield has only recently started to expand its reach in solar and wind, eventually turning out to be one of the most diversified clean energy plays you could bet on. Its acquisition of TerraForm Power last year was a big move in this direction.
To get a sense of how fast this company is growing, consider that it grew its funds from operations (FFO) by a compound annual rate of 10% between 2010 and 2020. Its dividends grew as rapidly during the period. Better yet, Brookfield expects 10% to 16% annualized growth in FFO through 2025, backed by its already humongous pipeline and potential growth opportunities via mergers and acquisitions.
Brookfield shares have delivered solid returns for long-term shareholders so far. While past performance doesn’t guarantee future returns, Brookfield’s cash flow and dividend growth plans hint at good times ahead for the stock. With the scope of renewable energy also growing bigger, I’m upbeat about this stock, which is also why I recently picked Brookfield Renewable as one of the three top growth stocks in renewable energy today.
Supporting the clean energy transition
Matt DiLallo (Clearway Energy): Clearway Energy is a leader in owning clean energy assets. The company operates the country’s 11th biggest onshore wind portfolio and ninth largest solar energy platform. It complements those assets with a portfolio of highly efficient natural gas power plants with modern fast-ramp technology. Overall, it has one of the lowest carbon intensities in the U.S. power sector.
Clearway doesn’t develop clean energy assets. Instead, it acquires fully contracted assets from developers, giving them the cash to continue investing in new projects. This strategy enables Clearway to generate steady cash flow to support its more than 5%-yielding dividend and acquire additional clean energy assets.
The company expects to grow that already attractive dividend by 5% to 8% per year over the long term. Powering that forecast is the embedded growth of its existing portfolio, recently secured transactions, and its financial flexibility to complete additional deals. Meanwhile, it has an extensive pipeline of future acquisition opportunities thanks to its relationship with a renewable project developer that controls a large-scale pipeline of projects. That long-term growth potential makes Clearway an excellent way to invest in the energy transition to cleaner power.
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