The energy sector, particularly oil and gas stocks, is a favorite of income investors.
And then there are the master limited partnerships – the pipeline companies – that often sport big yields as well. Companies like Energy Transfer (NYSE: ET) and Enterprise Products Partners (NYSE: EPD) yield 9.2% and 8.6%, respectively.
The large oil producers like Exxon Mobil have high yields because they’ve been beaten up like Rocky Balboa in every fight he ever fought.
But let’s face it… while the major oil companies boast high yields, they’re not exactly in hypergrowth mode.
There is, however, a group of stocks within the energy sector that is growing quickly. Many of these stocks pay shareholders a solid yield as well…
I’m talking about the renewables space.
A decade ago, renewables might have been considered fringe. Today, they’re big business.
Currently, roughly 20% of our energy comes from renewables. By 2030, that figure is forecast to grow to 32%, with onshore wind capacity expected to grow 50% and solar capacity projected to more than triple.
Many major energy producers and utilities are generating vast amounts of revenue and cash flow from nontraditional energy sources.
NextEra Energy Partners (NYSE: NEP), the clean energy arm of utility giant NextEra Energy (NYSE: NEE), generated $917 million in revenue last year and $570 million in cash available for distribution (a measure of cash flow), an increase of 43%.
The stock yields nearly 3%. Subscribers of my Oxford Income Letter who jumped on it two years ago when I first recommended it are enjoying a 5.5% yield and have seen their stock nearly double, as it has gone on a tear lately.
Avangrid (NYSE: AGR) is a 169-year-old utility that is transforming itself from primarily a natural gas distributor to one of the major solar and wind companies in the country. It is the third-largest wind and solar operator in the United States.
The stock yields a healthy 3.7%.
Atlantica Sustainable Infrastructure (Nasdaq: AY) operates renewable energy power generation assets, electric transmission lines and water desalination plants. It has a natural gas power business as well. The U.K.-based company yields an attractive 3.7%.
With President Biden’s focus on green energy, we are likely going to see more players get into the space and existing ones grow their cash flows significantly, which will allow them to pay more dividends.
The renewable energy sector already has quite a few options for investors seeking dividend income. Within a few years, it will be very fertile ground for income investors.