The Selloff Makes These Renewable Energy Dividend Payers Attractive

Summary

• The recent stock selloff has made renewable energy yieldcos attractive as long-term dividend growth plays.
• The decarbonization train has left the station, as 2020 was a massive leap forward for renewable energy.
• Renewables made up over 80% of new electricity generation additions in 2020, and expert forecasts see that share increasing further in the years ahead.
• Each of the four yieldcos highlighted in this article has its uniqueness, but all of them look well-positioned to thrive in our ever-greening world.
• Looking for a helping hand in the market? Members of High Yield Landlord get exclusive ideas and guidance to navigate any climate. Learn More »

Thesis: Dividend Growth Play On Renewables

After a recent selloff, four renewable energy yieldcos that offer dividend yields between 3.4% and 5.6% as well as strong growth rates look attractive as long-term dividend growth plays.

In what follows, we'll review the current state of utility sector decarbonization and the growth of renewables, then we'll discuss yieldcos and finish with the case for the four highlighted below.

In short, these four stocks look like fantastic vehicles through which dividend-focused investors can play the mega-trend of a rapidly "greening" economy.

Renewable Energy Growth Picking Up Steam

Global renewable electricity sources grew at their fastest pace in 20 years in 2020.

That is how a recently released report by S&P Global begins, citing data from the International Energy Agency. New renewable energy installations leaped significantly last year, as installations of non-renewable electricity generation sources continued their multi-year decline. Renewables' share of new generation additions topped 80%, which also was the continuation of a longstanding trend.

Source: International Renewable Energy Agency

And last year's leap in wind, solar, and hydroelectric energy additions should prove to be more than a one-time event. Rather, the report indicates that this surge in renewables is set to become the new normal.

In 2020, for the first time, the capacity growth of solar (22% year-over-year) outpaced that of wind (18% YoY), reflecting the advancement and falling cost of production of photovoltaic technology. In the chart below, we find the total installed capacity on the left and the breakout of new additions in 2020 by type on the right.

Source: International Renewable Energy Agency

Renewable generation capacity increased by 261 gigawatts (10.3%) across the globe in 2020. In 2021, the IEA expects another 270 GW of renewables capacity to be added, followed by 280 GW in 2022. And by 2022, solar PV installations should make up over

Analyst’s Disclosure:I am/we are long AY, BEP, CWEN.A, NEP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.