Dividend investors often get too caught up with yield and don’t pay enough attention to dividend growth. That’s a big risk if you hope to live off your dividend income in retirement. If you add dividend growth into your selection criteria, you’ll likely be better off. NextEra Energy (NYSE: NEE) and Brookfield Renewable (NYSE: BEP)(NYSE: BEPC) are strong dividend options that score well on both yield and dividend growth.
NextEra Energy has increased its dividend annually for more than 25 years. The utility company’s dividend yield is currently around 2.7%, which is well above the market’s 1.1%. But the real story is the rate of dividend growth, which averaged around 11% per year over the past decade.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
This is important because the historical inflation rate is around 3.8%. That eats away at the buying power of your dividends. Since NextEra’s dividend has grown well above that rate, its buying power has expanded over time.
However, the real story here isn’t the past; it is the future. NextEra owns a large regulated utility and is also one of the largest solar and wind power companies in the world. It is well-positioned to benefit as the world continues to shift toward cleaner energy alternatives. That should help keep the dividend growing nicely for years to come.
Brookfield Renewable is 100% focused on clean and renewable power. It has a global portfolio of hydroelectric, solar, wind, storage, and nuclear energy assets. It hasn’t been around as long as NextEra, but the income that Brookfield Renewable pays out has increased steadily for more than a decade. The annualized rate of increase was 5% over that span, just over the rate of inflation growth over time.
The real draw here, however, is the yield. Brookfield Renewable Partners has a 5% yield, and Brookfield Renewable Corporation has a 3.8% yield. They represent the same entity and have the same dividend; the different yields stem from market demand for the different share classes. Institutional investors are often barred from owning partnerships, which creates a significant income opportunity for individual investors.
If you are a dividend investor looking for a mix of yield and dividend growth, NextEra Energy and Brookfield Renewable have you covered. NextEra is a better pick for those with a dividend growth focus, while Brookfield Renewable Partners will likely appeal to those focused more on income. A $2,000 investment will let you buy around 20 shares of NextEra or 60 units of Brookfield Renewable Partners.