A Power Company With An Amazing Blend Of High Yield (5.75%) And Dividend Growth (8%)
Dividend growth is important.
It ensures our income outpaces inflation and covers our expenses far into the future.
But sometimes it comes at the expense of low dividend yields.
A company growing its dividend 10% or more each year sounds great… until you find its dividend yield is less than 1%.
Those aren’t bad dividend stocks, but you need to be really patient before the money starts rolling in.
However, there’s a stock with the best of both worlds.
Clearway Energy (ticker: CWEN) operates clean energy generation and sells the electricity directly to utility companies.
It’s a very interesting business model.
Clearway specializes in solar and wind farms and runs those operations very efficiently.
Utilities prefer working with Clearway since renewable energy is very different from generating power using natural gas or coal.
Clearway only sells to utility companies, so it doesn’t need to work with individuals or businesses.
Clearway’s dividend is incredible.
Its current 5.75% dividend yield is one of the highest among power companies.
And let’s not forget the dividend growth.
Clearway started trading in 2015 and has paid a dividend since day one.
Since then, Clearway has averaged over 8% dividend growth each year.
Two things stand out from the chart.
First, there was a 40% dividend cut in 2019, which we’ll discuss in a minute.
Second, the dividend is rising every quarter.
Most companies with dividend growth only grow their dividends once per year.
But Clearway is one of the few companies doing it differently.
Outside of 2019, Clearway has raised its dividend every single quarter since 2015.
It’s quite an accomplishment, which shows a huge commitment to dividend growth.
Clearway’s next dividend hike is just around the corner.
Its next payment will be $0.475 per share, which is 10% more than its payment last year.
However, you can’t wait too long.
You need to own shares in Clearway by next Monday (August 31) to get the higher payment.
Now, let’s talk about 2019.
Remember, Clearway sells renewable energy directly to utility companies.
Its customer base is very concentrated since there aren’t thousands of utility companies to sell to.
In 2019, PG&E, one of Clearway’s largest customers, went bankrupt.
PG&E’s faulty equipment caused the Camp Fire, one of the worst wildfires in California’s history.
PG&E was on the hook for more than $30 billion in damages, and there were concerns Clearway was about to lose one of its largest customers.
Clearway’s board of directors decided to cut its dividend to ensure the company had enough cash to continue operating.
However, it wasn’t long before PG&E’s troubles were in the rearview mirror, and Clearway was able to resume its dividend growth.
And even beyond the next payment, Clearway is forecasting 8% dividend growth each year into 2030.
CAFD stands for cash available for distribution, which is the source of Clearway’s dividend payments.
So, if you’re looking for dividend growth but don’t want to sacrifice immediate income, then definitely give Clearway Energy a look.
Do you own any high-growth / high-yield dividend stocks?
There aren’t many, so I want to know your list!
Michael Jennings
Dividend Stocks Research
Category: Dividend Stocks To Buy?, Dividend Yield
