These 2 dividend stocks will grow in 2024 and beyond

The renewable energy industry has hit a small speed bump In recent years. Rising interest rates have made project financing more expensive, impacting the sector. Higher rates have also reduced the value of income-producing assets such as renewable energy dividend stocksincreasing their yields.

However, many expect interest rates to start falling in the coming years. This should increase the value renewable energy stocks, which are benefiting from the strengthening of factors favoring decarbonization. These catalysts should be provided by leading producers of renewable energy The energy of the next era (NYSE:NEE) AND Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A) power to ascend in 2024 and beyond.

Strong growth should To continue

NextEra Energy’s stock price is currently approximately 20% below its 2022 high, which was just before interest rates started rising. This falling share price helped push utilitarian dividend rate up to almost 3%, i.e. more than twice as much S&P 500 dividend rate.

Shares of NextEra Energy fell even as the company continues to grow at an above-average rate. Adjusted earnings per share increased 9.3% last year and 8.3% year-over-year in the first quarter. NextEra Energy’s rapidly growing earnings have allowed it to increase its dividend by about 10% annually over the past few years.

NextEra expects it continue to grow at a healthy pace over the next few years. It anticipates adjusted earnings per share growth of 6% to 8% annually through 2026, with growth likely to be at or near the high end of that range. Additionally, it plans to deliver dividend growth of around 10% annually through at least 2026. In the meantime, growth could be even stronger in the futuregiven expectations that renewable energy demand will grow at a compound annual rate of 13% through 2030. As the nation’s leading producer of renewable energy, NextEra should continue to meet a significant portion of this growing demand.

With upwinds stronger than ever and the risk of falling interest rates, NextEra Energy’s stock price could skyrocket over the next few years. Add to this an attractive and rapidly growing dividend, and the company will be able to produce powerful total returns.

A fully efficient development plan

The Clearway Energy share price has lost more than a third of its value from its peak in 2022. Rising interest rates are a major factor. They helped boost the clean energy infrastructure company’s dividend yield Near 6%.

Higher rates boosted Clearway’s cost of capitalwhich makes issuing shares and debt to finance new investments more expensive. However, thanks to the company’s capital recycling strategy he didn’t need it to gain access to external funds. Clearway cashed in on the value of its thermal assets several years ago and is plowing the proceeds into higher-return renewable energy investments.

The story continues

This strategy supports Clearway’s view that it can continue to grow its high-yield dividend towards the upper end of its target annual range of 5% to 8% through at least 2026. The company has the scope to utilize all proceeds from the thermal sale as part of the transaction , which should be closed within the next several years.

Meanwhile, energy from clean natural gas power plants is in high demand enables the company to secure higher rates in the event of expiry of existing energy purchase agreements. This confirms the company’s belief that it can provide at least a 5% dividend increase in 2027 without making additional investments. However, with interest rates expected to decline, Clearway’s share price should increase. This will lower the cost of capital, increasing the company’s ability to invest in new renewable energy assets.

Add a high and steadily growing dividend to the company’s share price upside potential, and Clearway Energy could generate huge profits in the coming years.

Huge return potential

NextEra Energy and Clearway Energy continue to grow at a solid pace despite unfavorable changes in interest rates. This problem may soon become a tailwind and take pressure off their shares. This catalyst, combined with continued strong growth in renewable energy, could give these stocks the strength to grow rapidly in the coming years. This makes them great stocks to buy for people looking for income and growth potential.

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Matt DiLallo holds positions at Clearway Energy and NextEra Energy. The Motley Fool holds positions on and recommends NextEra Energy. The Motley Fool has a disclosure policy.

These 2 Dividend Stocks Will Grow in 2024 and Beyond” was originally published by The Motley Fool