3 Energy Stocks to Buy and Hold for Big Long-Term Potential

The global economy has been steadily transitioning to renewable energy for years. The pace has accelerated in recent years, driven by falling costs and government incentives. Demand for renewable energy could accelerate even further in the future, driven by growing demand from technology companies for energy for cloud computing and artificial intelligence (AI) applications.

These trends are in the hands of the leaders renewable energy producers NextEra Energy (NYSE:NEE), Brookfield Renewables (NYSE: BEPC) (NYSE:BEP)AND Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A). That’s what makes them great. energy shares buy and hold for a longer period total return potential.

Powerful Wealth Creator

NextEra Energy has been a wealth creation machine for years. Leading American utility generated an 11.4% annual total return over the past 15 years. This outpaced other utilities (6.8% annual total return) and S&P500 (10.5%).

The driving force behind its profits is the constantly growing profits and dividendIts adjusted earnings per share have increased 9% year over year over the past decade, while its dividend has increased 10% year over year. NextEra has benefited from continued growth in electricity demand from Florida utility customers, its investments in renewable energy and accretive acquisitions.

These catalysts should continue to drive above-average growth. NextEra expects to grow its adjusted earnings per share toward the high end of its annual target range of 6% to 8% through at least 2027. In the meantime, it expects to increase its dividend (which yields nearly 3%) at a rate of 10% per year through 2026.

Its long-term prospects are equally bright, given the huge demand for renewable energy in the future. New renewables and additional storage capacity are expected to triple in the next seven years, compared with the previous seven.

High growth potential

Brookfield Renewable has grown rapidly over the years. The leading global renewable energy company achieved 12% compound annual growth in funds from operations (FFO) per share since 2016. Meanwhile, the company has increased its dividend at a rate of 6% per year over the past two decades.

The company should continue to generate strong earnings and revenue growth. Brookfield Renewable expects a trio of organic drivers (inflation-linked rate increases, margin-enhancing actions and its extensive growth pipeline) to drive FFO per share growth of 7% to 12% annually through 2028.

Meanwhile, it expects accretive acquisitions to drive FFO growth at a double-digit rate. The company recently agreed to acquire a European renewable energy developer with a wide range of projects at various stages of development. These growth drivers will provide Brookfield with a wealth of opportunities achieve your goal of increasing increases its dividend (which has a yield of around 5%) by 5% to 9% per year.

Another factor in this view is its growing portfolio of sustainable solutions. Brookfield has built platforms in carbon capture and storage, biofuels, recycling, nuclear services and solar panel manufacturing. These investments increase its long-term growth potential.

We are facing a high level of dividend growth

Clearway Energy is one of the nation’s largest renewable energy producers. It also has a portfolio of cleaner natural gas-fired power generation facilities. These assets produce A lot With stable cash flow, which Clearway pays out in the form of a high-yielding dividend (recently approaching 6%).

The company expects to increase the payout toward the upper end of its annual target range of 5% to 8% through 2026. The company has already secured and financed almost all of that growth. Clearway sold its thermal assets several years ago and used the proceeds to invest in higher-yielding renewable energy. The company has committed to implementing or line of sight about enough new investments to meet the dividend growth target.

Meanwhile, Clearway has increasing visibility into its ability to increase its dividend beyond 2026. It has been renewing its gas-fired power plants at rates high enough to support a low dividend increase in 2027. It also sees several opportunities to add battery storage to its existing wind and solar projects. It also has a strategic relationship with a leading renewable energy developer that should continue to provide it with new investment opportunities.

Connected to powerful growth megatrend

Demand for renewable energy should continue to grow rapidly in the coming decades. This should allow NextEra Energy, Brookfield Renewable and Clearway Energy to grow earnings and dividends at a healthy rate.

These growth factors are what make these top energy stocks generate strong total returns for investors over the long term. This makes them great stocks to buy and hold for long-term potential.

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Matt DiLallo holds positions in Brookfield Renewable, Brookfield Renewable Partners, Clearway Energy, and NextEra Energy. The Motley Fool holds positions in and recommends Brookfield Renewable and NextEra Energy. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

3 Energy Stocks to Buy and Hold with Great Long-Term Potential was originally published by The Motley Fool